Beijing Yanjing Brewery Co.Ltd(000729) (000729)
Beijing Yanjing Brewery Co.Ltd(000729) : state owned assets background, rooted in Beijing and looking at the whole country. Beijing Yanjing Brewery Co.Ltd(000729) the predecessor was established in 1980 to respond to the call of the state to develop the beer industry. In 1997, it landed in A-Shares and became the third listed beer enterprise. It took only 15 years from the establishment of the company with a capacity of only 10000 tons to becoming the first large beer enterprise with a capacity of more than 500000 tons and ranking first in national production and sales. The actual controller of the company is Beijing holding group, which is wholly controlled by Beijing SASAC, The total shareholding of state-owned assets is 59.27%. The company takes Beijing, Inner Mongolia and Guangxi as its core markets. The company once entered a trough period in its development. With the optimization of product structure and the gradual improvement of product profitability in recent years, there is still much room for improvement against other leading companies.
1980-2013: Yanjing’s brilliant high-speed development stage. 1980-1995: marketization released the vitality of the company, from nothing to the first in the country. In 1989, Li Fucheng, then factory director, took the lead in breaking the unified purchase and exclusive marketing of the planned economy, becoming the first market-oriented enterprise in China’s beer industry. In 1995 Beijing Yanjing Brewery Co.Ltd(000729) became the first beer enterprise in terms of production and sales in China; 1996-2007: nationwide distribution and rapid development. 1995-2005 Beijing Yanjing Brewery Co.Ltd(000729) achieved the first national production and marketing for 10 consecutive years. The company adopted the way of “self construction + acquisition” to promote nationalization; 2008-2013: development entered a new stage. A clear “1 + 3” brand strategy has been formed to consolidate the advantageous market at the market end. Looking back on Yanjing’s development, excellent brand and product quality control, proactive management and excellent market layout awareness are the key.
2014-2018: Yanjing Beer entered a trough period driven by many factors. At the industry level, China’s per capita drinking capacity has reached the world average level. In 2014, beer production turned negative for the first time. China has entered a new stage of “volume reduction and price increase”. However, industrial cognition has a time lag. In the stage of negative growth of industry output, continuous capacity expansion and cost investment have deteriorated the competitive environment, At the same time, the weak beer consumption in North China and the outflow of population from Beijing affect the sales of Yanjing; At the company level, product side: the launch speed of new products slows down, and the launch time of high-end core product Yanjing U8 is later than that of other leaders; Business side: employee incentive has been reduced. After the industry enters a new stage, the benefits of subsidiaries become worse, and the losses of subsidiaries erode profits.
From 2019 to now: the future of Yanjing is promising. Brand side: focusing on the “1 + 3” brand strategy, the revenue of the main brand has gradually stabilized, and the business data of the three sub brands have rebounded significantly in recent years, which is expected to continue to contribute to the growth of the company; Product side: Yanjing U8 is launched to supplement the product system, with excellent quality. At the same time, it forms a supplement to fresh beer and pure raw beer in price, focusing on “small degree and big taste”, and marketing innovation promotes the rejuvenation of product and brand image; Business side: cost reduction and efficiency increase is an important task. The company has established a weak market assistance mechanism to help subsidiaries reduce costs and efficiency increase. At the same time, it has set up a sales company to coordinate production and sales in the region. In the future, it is still necessary to improve the operation efficiency represented by capacity utilization. Compared with Tsingtao beer, the company has a large space for cost reduction and efficiency increase, which can be expected in the future.
Yanjing profitability improvement Outlook: turning losses and improving human efficiency are the top priority. Compared with Tsingtao beer, the company has a large difference in other income and income tax. Due to the low capacity utilization rate and the erosion of profitability by depreciation expenses, considering that the company has no plant plan, improving personnel efficiency is the top priority. In recent years, the company has concentrated on evacuating production personnel and employees of vulnerable subsidiaries at the statement end. Through calculation, if the personnel efficiency is increased to the level of Tsingtao Brewery Company Limited(600600) 2020, The net interest rate can be increased by 2.7pct, and the deferred income tax assets are expected to contribute 0.4pct net interest rate after the subsidiaries turn around their losses.
Profit forecast: from 2021 to 2023, the company is expected to achieve revenue of RMB 11.51/122.0/12.92 billion, year-on-year + 5.3% / + 6.0% / + 5.9%, net profit attributable to parent company of RMB 270 / 4.1/510 million, year-on-year + 38.4% / 50.3% / 23.5%, corresponding to PE of 79 / 53 / 43 times. From the perspective of EV / EBITDA, the company’s valuation has high value. Considering that the development of the company’s new product Yanjing U8 is expected to exceed expectations, At the same time, cost reduction and efficiency increase bring potential performance flexibility to the company, which is covered for the first time and rated as “overweight”.
Risk tip: the promotion of Yanjing U8 was not as expected, the epidemic repeatedly affected the dynamic sales of beer, the cost rise exceeded expectations, food safety problems, etc.
