Guangzhou Pharmaceutical is seeking regulatory approval to issue A shares to finance the H share's business development. Vice-chairman Li Yimin would not disclose the amount the firm is aiming to raise and what the money will be used for, saying the request was pending approval by the China Securities Regulatory Commission. But he said potential uses included the expansion of production facilities, development of traditional Chinese medicine, construction of a logistics centre and retail network expansion. The firm is among several H shares which have recently shown interest in issuing A shares to finance growth. Many H shares have had difficulty raising fresh funds as their share prices have languished below their per share net asset value, the minimum price at which they are allowed to issue new shares. As most A shares are trading at higher price-earnings multiples compared with the H-share market, permission to issue A shares has breathed life back into the H-share sector. Trading of Shanghai and Shenzhen A shares is restricted to mainland investors. Foreign investors are allowed to trade Shanghai and Shenzhen-listed B shares and Hong Kong-listed H shares. Guangzhou Pharmaceutical yesterday reported 15.6 per cent net profit growth to 78.4 million yuan (about HK$73.44 million) for the six months to June 30, as turnover grew 13.7 per cent to 2.15 billion yuan. Mr Li attributed the growth to tightened cost control and sales growth in key products. Manufacturing, which accounted for 32.2 per cent of turnover, saw a 6.6 percentage-point year-on-year improvement in gross profit margin due to cost-control measures. Keen market competition was blamed for a one percentage-point decline in gross margins in its trading business - which contributed to 67.8 per cent of turnover. The firm has planned capital expenditure of 150 million yuan this year, of which 66 million was spent in the first half. It has budgeted 20 million to 30 million yuan to set up 17 retail outlets in the second-half.