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Zebra Consumption Chen Xiaojing

Faced with the huge demand for rice, flour, grain and oil in the country, Golden Dragon Fish has both strong brand influence and channel supply advantages, but after working hard for half a year, it still does not make any money.

Analyzing the semi-annual report recently disclosed by the company, if it were not for the assistance of investment income and subsidies, the performance would be even more embarrassing.

In addition to grain and oil, the company has focused on developing condiments, central kitchens and other products, trying to boost performance by cultivating new businesses. It is still difficult to see how effective it is.

Earn some hard earned money

With an annual revenue of 200 billion yuan, Golden Dragon Fish (300999.SZ) has not brought many surprises to small and medium-sized investors.

Recently, the company handed in a not-so-good half-year performance report. During the period, the company achieved operating income of 109.478 billion yuan, a year-on-year decrease of 7.78%; net profit attributable to the parent company was 1.097 billion yuan, a year-on-year increase of 13.57%; and non-net profit was 161 million yuan, a year-on-year increase of 1013.79%.

Among the non-recurring gains and losses, subsidies included in the current period's gains and losses totaled RMB 142 million, and the fair value changes and disposal gains and losses of financial assets amounted to RMB 1.03 billion. In the current period, non-recurring gains and losses totaled RMB 936 million.

During the period, the company's two major businesses, kitchen food and feed raw materials and oil technology, achieved operating revenues of 69.674 billion yuan and 38.966 billion yuan, respectively, down 5.24% and 12.37% year-on-year, with gross profit margins of 6.86% and 1.01%, respectively; sales volumes were 11,373 kilotons and 12,129 kilotons, respectively, up 2.53% and 3.67% year-on-year.

In the first half of 2024, Golden Dragon Fish's overall gross profit margin was 4.90% and its net profit margin was 0.94%, a decrease of 0.75 percentage points and an increase of 0.27 percentage points respectively compared with the same period last year.

Low profit levels are a common problem for large grain and oil companies. The industry is all about small profits but quick turnover and winning by volume, and this is especially true for Golden Arowana.

Taking the company's two major businesses, kitchen food, feed raw materials and oil technology, as an example, during the period, operating costs accounted for 93.14% and 98.98% of its operating income respectively, and direct materials accounted for about 90%. Any slight fluctuation in the price of upstream raw materials will seriously affect the company's profit level.

In addition, weak downstream demand and intensified market competition are also affecting dealers' confidence.

The company once admitted in an institutional survey that consumption continued to be weak and dealers' inventory was slowly being digested, which reduced their willingness to purchase goods.

Financial report data shows that in 2023, the company's contract liabilities fell by 31.47% from the previous year to 2.981 billion yuan. In the first half of this year, the contract liabilities were 1.501 billion yuan, down 49.65% from the same period last year. This shows that dealers are still not willing to pay. Many dealers simply quit. In the first half of the year, the company's dealers decreased by 465, of which 221 were in the eastern region. As of the end of June, there were 8,257 dealers left.

"Oilgrass" falls

Golden Dragon Fish is the largest grain and oil supplier in China. Its core brand "Golden Dragon Fish" is no longer just focused on the edible oil field, but has also extended to sub-sectors such as rice and flour condiments and pre-prepared meals in recent years.

According to data from the National Grain and Material Reserves Fund, in 2022, the market size of Golden Dragon Fish, COFCO Group, Luhua, Shanghai Liangyou, and Kalanchoe will account for 39%, 15.3%, 6.7%, 3.1% and 2.6% respectively.

But in the past few years, this fish seems to be swimming less and less vigorously, and its profitability has dropped sharply. From 2020 to 2023, the gross profit margin dropped from 11.01% to 4.83%, and the net profit margin hovered between 1% and 4% during the same period. As the outside world said, it is just a "porter" of grain and oil.

In the eyes of Jinlongyu, the business philosophy of large volume and small profits is its own competitive barrier and moat, which can be used to drive away other potential competitors and maintain its dominant position.

The company successfully entered the capital market in 2020. At its peak in early 2021, its total market value approached 800 billion yuan, and it was crowned with the halo of "Oil Mao". Today, its total market value is only 142.6 billion yuan (yesterday's closing price).

As the company's performance continued to be weak and its stock price continued to fall, small and medium-sized investors "cut their losses" and left. The number of shareholders of the company dropped from 150,900 on December 31 last year to 137,900 on August 9 this year.

At the same time, institutional investors also began to withdraw. At the end of last year, there were 262 institutions holding shares, but as of June 30 this year, there were only 11 left.