the annual report of Jinhui Liquor Co.Ltd(603919) ( Jinhui Liquor Co.Ltd(603919) . SH) exploded.
In 2021, Jinhui Liquor Co.Ltd(603919) operating revenue was 1.788 billion yuan, with a year-on-year increase of 3%; The net profit attributable to shareholders of listed companies was 325 million yuan, a year-on-year decrease of 2%. More notably, the company’s single quarter revenue in the fourth quarter was 447 million yuan, a year-on-year decrease of 35%; The attributable net profit was 82 million yuan, a year-on-year decrease of 53%. Affected by this, the company’s share price still fell 2.86% against the background of the sharp rise of 3.48% in the Shanghai index.
Why did Fosun take over Jinhui Liquor Co.Ltd(603919) with little effect What changes are hidden behind the Jinhui Liquor Co.Ltd(603919) annual report?
disappointed transcript
Jinhui Liquor Co.Ltd(603919) is located in Hui County, Longnan City, Gansu Province, adjacent to Jiuzhaigou, Sichuan Province. It is equivalent to Wuliangye Yibin Co.Ltd(000858) ( Wuliangye Yibin Co.Ltd(000858) . SZ) and Jiannanchun in the upper reaches of the Yangtze River, the gold sector of China’s famous liquor. As a typical regional Baijiu, the company’s marketing network is mainly Gansu, covering the Northwest market of Shaanxi, Ningxia, Xinjiang and Qinghai. After being acquired by Fosun, the company also actively arranged the East China markets such as Shanghai, Jiangsu and Zhejiang.
Jinhui Liquor Co.Ltd(603919) belongs to Luzhou flavor Baijiu style. According to the Baijiu market structure and the purchasing power of consumers, the products can be divided into three grades: low, medium and high. Among them, low-grade products refer to products with an external price of less than 30 yuan / bottle, mainly including Century Golden Emblem two stars, Golden Emblem aging, etc; Mid range products refer to products with an external price of 30 yuan to 100 yuan / bottle, mainly including three stars of century gold emblem and four stars of century gold emblem; High end products refer to products with an external price of more than 100 yuan / bottle, mainly including Golden Emblem 18 years (about 480 yuan / bottle), Century Golden Emblem five stars (about 200 yuan / bottle), soft Golden Emblem H3 (about 150 yuan / bottle), etc.
2021 is a year of great concern for Jinhui Liquor Co.Ltd(603919) and the first full financial report year completely controlled by Fosun. As early as may 2020, Jinhui Liquor Co.Ltd(603919) announced that the former controlling shareholder yate Group planned to transfer the controlling right to Fosun Group, and the relevant controlling right was transferred in August of that year. In the past two years since the announcement of equity transfer, the valuation of the company has increased from 26 times to 103 times. Even now the share price has fallen sharply, there is still 43 times the valuation.
The market’s increase in the valuation of Jinhui Liquor Co.Ltd(603919) is based on its continued optimism for the future of the company. However, judging from the report card in 2021, Jinhui Liquor Co.Ltd(603919) performance disappointed investors.
For the sharp decline in the fourth quarter, some securities companies pointed out that it was mainly caused by the epidemic in Lanzhou, Tianshui and other places in Gansu from October to November last year and the repeated epidemic in Xi’an at the end of the year.
But such an explanation is not convincing. In 2021, there were many epidemic incidents in many places throughout the country. But the Baijiu industry above scale enterprises still achieved sales revenue of 603 billion 300 million yuan, an increase of 18.60% over the same period. The total profit was 170.2 billion yuan, an increase of 33%. From the perspective of the enterprise itself, the epidemic situation in 2021 has been significantly controlled compared with that in 2020, but the company’s net profit is still declining. The “pot” can not simply be carried by the epidemic situation.
business takes care of one thing and loses the other
Fosun’s accession has indeed changed Jinhui Liquor Co.Ltd(603919) ‘s business philosophy, and the most significant change is the high-end products and the nationalization of business. In terms of sales area, the company’s business revenue outside the province in 2021 was 392 million yuan, a year-on-year increase of 35.71%. From the perspective of product sales structure, in 2021, the company increased the sales of high-end products of more than 100 yuan, such as Jinhui 28 and Jinhui 18. The operating revenue of this business segment was 1.095 billion yuan, a year-on-year increase of 26.24%, and the proportion of revenue increased to 62.11%, an increase of 11.25 percentage points over the same period of last year. From the perspective of sales strategy, the company matches high-end media resources for high-end products, and puts high-frequency image advertisements of Jinhui 28 products in key markets and core points such as airports, high-speed railway stations and outdoor brands to improve the brand image.
Fosun has paid a price while changing Jinhui Liquor Co.Ltd(603919) .
From the perspective of sales area, despite the growth of business outside the province, in the market in Gansu Province, the base camp, Jinhui Liquor Co.Ltd(603919) sales in the same period reached 1.396 billion yuan, a year-on-year decrease of 3.2%.
From the perspective of product structure, Jinhui Liquor Co.Ltd(603919) high-end road is not smooth. At present, the 28 year sales price of the Golden Emblem mainly built by the company is about 1200 yuan / bottle, which even exceeds the price of Wuliangye Yibin Co.Ltd(000858) core large single product puwu, which is a challenge to the market recognition of the product itself. In addition, since 1952, China has held five national wine reviews (to select national famous wines), and Jinhui Liquor Co.Ltd(603919) were not selected. How can the company tell the story of high-end wine on the basis of non national famous wine?
In order to better sell wine, Jinhui Liquor Co.Ltd(603919) can only choose to significantly increase the selling expenses. In 2021, the company’s sales expenses reached 278 million yuan, a year-on-year increase of 25.09%. Compared with the revenue increase of 3.34%, it is obvious that the company has made great efforts in sales, but with little effect, which also led to the decline of net profit.
Jinhui Liquor Co.Ltd(603919) product structure is changing. In 2021, the company’s medium and low-grade liquor sales were 652 million yuan and 164 million yuan respectively, with a year-on-year decrease of 19.46% and 43.35% respectively. While continuously increasing the sales of liquor with more than 100 yuan, Jinhui Liquor Co.Ltd(603919) is losing its original market share of liquor with less than 100 yuan.
center data source: prospectus, interface, news research department / center
In addition to the operational strategy of giving consideration to one and losing the other, Fosun brings few direct purchases to Jinhui Liquor Co.Ltd(603919) the company. In 2021, Fosun purchased only 21.61 million yuan of goods from the company, even less than half of the estimated amount at the beginning of the year (50 million yuan). In order to better serve Fosun in the future, Jinhui (Shanghai) liquor sales Co., Ltd. was established by Jinhui Liquor Co.Ltd(603919) in September 2021, which is mainly responsible for the sales within Fosun ecosystem. In addition, in October, the Company re established Jinhui Liquor Co.Ltd(603919) sales Jiangsu Co., Ltd., which is mainly responsible for sales in East China such as Jiangsu and Zhejiang (Fosun headquarters is located in Shanghai in East China).
Although it can provide certain intra group procurement, Fosun cannot provide a dealer system that is particularly important for wine enterprises. The channel is king, and the core dealers of various liquor enterprises are important competitiveness. By the end of 2021, Jinhui Liquor Co.Ltd(603919) dealers had 589, with a year-on-year increase of 27.49%. The increasing number of dealers did not bring too much sales performance to the company. In 2021, the company sold 1.661 billion yuan through dealer channels, with a year-on-year increase of only 1.2%.
In the annual report, Jinhui Liquor Co.Ltd(603919) set up its own strategic goal of becoming the top ten Chinese Baijiu, and this year it strives to achieve a business income of 2 billion 500 million yuan. The net income of the parent company in 2023 is 3 billion yuan, which also belongs to the parent company’s main business in 2023.
CITIC Societe Generale, which became the third largest shareholder of Jinhui Liquor Co.Ltd(603919) as early as 2019 and has a board seat, seems not so convinced of these goals. As of March 9, CITIC Societe Generale had reduced 7.71 million shares of the company through centralized bidding, accounting for 1.52% of the total share capital of the company. After the reduction, its shareholding ratio had decreased from 5.15% to 3.63%.
In the face of two consecutive years of single digit revenue growth, Jinhui Liquor Co.Ltd(603919) how to achieve the revenue target of 2.5 billion and how to support the current valuation of 43 times will be an arduous challenge in the future.
