On March 18, Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) announced that in order to further focus on the main business of condiments, it planned to sell 51% equity of the wholly-owned subsidiary Hengshun mall to the controlling shareholder Hengshun Group at a transaction price of 84.08 million yuan (premium rate of 9.94%), and Hengshun Group would pay in cash.
The reporter learned that as early as December last year, Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) said it planned to sell 100% of the equity of Hengshun mall to the controlling shareholder. In the transaction of selling 51% equity, the company also said that before the share transfer agreement came into effect, Hengshun mall should repay loans of 228 million yuan and 17 million yuan to Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) and its subsidiary Zhenjiang Hengshun Bioengineering Co., Ltd.
The main assets of Hengshun mall are investment real estate, and its net profit in 2020 and 2021 will lose 1.15 million yuan and 14.15 million yuan respectively. As the company with the largest non main business assets, Hengshun mall’s annual losses and huge loans are undoubtedly a “hot potato”.
Referring to the above resale transaction, Bai Wenxi, chief economist of IPG China, said in an interview with the reporter of Securities Daily: ” Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) transferring the loss making ‘hot potato’ to the controlling shareholder can quickly get rid of and peel off the loss making real estate business and assets. While the performance can be improved rapidly, the main seasoning industry is also more prominent.”
In the past two years, due to the impact of the epidemic and community group buying, the sales revenue of Hengshun Shangchao vinegar has been under pressure, forcing enterprises to carry out marketing reform. As many players scrambled to squeeze into the condiment track, Hengshun began to peel off its non main business and “go to battle light” to protect the main business of condiment.
In order to integrate marketing resources and realize the agglomeration of main business assets, in December 2021, Hengshun announced that it would acquire 35% equity of Shanxi Hengshun old vinegar Co., Ltd. for 19.17 million yuan, so as to realize 100% holding; In the same month, the company announced that it would transfer 72% equity of its Hengshun rice industry to the controlling shareholder Hengshun Group for 11.37 million yuan. In March this year, the company once again announced that it planned to increase the shareholding of 8.7% of Zhenjiang Hengshun new condiment Co., Ltd. by 5.4 million yuan, increasing the shareholding ratio to 76.6%.
For the above series layout, Zhu danpeng, senior researcher of China Brand Research Institute, told reporters: “Hengshun’s main vinegar industry is not strong, its sideline industry is too weak, and the front is too long. The company has improved its comprehensive strength by gathering its main business assets this time. However, with the continuous expansion of Shanxi vinegar enterprises, the overall living space of the company will be further compressed.”
“The main business of Hengshun vinegar accounts for more than 80% of the total revenue, but the vinegar market share is only about 10%. With the infiltration of Shanxi aged vinegar such as water tower and Zilin into East, central and South China, Foshan Haitian Flavouring And Food Company Ltd(603288) , Qianhe Condiment And Food Co.Ltd(603027) have merged and entered the vinegar industry, and the squeeze competition of Hengshun vinegar industry is more intense.” According to Bai Wenxi, Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) should seek breakthroughs in product line richness, marketing and industry M & A integration, so as to improve market share and brand influence.
From the performance forecast of the company in 2021, affected by covid-19 epidemic, rising prices of raw and auxiliary materials, marketing reform and other factors, the sales of Hengshun in important regions decreased significantly last year, and the comprehensive gross profit margin also decreased compared with the same period last year. It is estimated that the overall attributable net profit will decrease by 170 million yuan to 200 million yuan compared with the same period of last year (after restatement), with a year-on-year decrease of 53.92% to 63.44%.
In this regard, Wang Yanhai, a researcher at Minsheng securities, said that in terms of products, at present, Hengshun focuses on building “three swordsmen” of vinegar, cooking wine and sauce, enriching product types and gradually getting rid of its dependence on a single category of vinegar; In terms of marketing, the company accelerates the growth and rise of new retail forces. Since November 20, 2021, the company has raised the price of some products, ranging from 5% to 15%, but the transmission of price increase and the landing of terminals still need to be continuously observed.
The reporter noted that in 2022, relying on its reputation in the main battlefield in East China, Hengshun increased the penetration of catering channels, quickly reached consumers with e-commerce, and covered areas with weak brands through circulation channels. At present, the core sales areas have been expanded to Hefei, Nanjing, Zhenjiang, Changzhou, Wuxi, Suzhou and Shanghai.
“From the channel and grassroots research data, the dynamic sales of condiment business from January to February are good. It is expected that Hengshun’s revenue in the first quarter is expected to usher in rapid growth.” For the market development prospect of Hengshun this year, Zhao Guofang of Anxin Securities said: “with the continuous release of marketing reform dividends, the company’s profits are expected to be more flexible.”
In the face of the market environment with a large number of condiment enterprises and fierce competition, how should Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) seek a breakthrough? Song Qinghui, chief economist of Qinghui think tank, said in an interview with Securities Daily: “At present, China’s condiment industry is entering a stage of rapid growth with huge market space. Jiangsu Hengshun Vinegar-Industry Co.Ltd(600305) in the future, we should increase marketing efforts and make greater breakthroughs in market share through capital means such as mergers and acquisitions and restructuring. With the continuous optimization of the condiment industry, the market share of the industry is expected to further concentrate on leading enterprises.”
