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Author | Zhao Pu

Editor: Gao Yan

Source | Yema Finance

As the saying goes, "A family cannot be without a master for a day." Since China's packaging industry leader Dashengda (603687.SH) announced on August 14 that its actual controller and chairman Fang Nengbin was detained, investors have generally been concerned about who will replace Fang Nengbin.

The reason why the industry pays attention to Dashengda is that Dashengda’s customers are quite influential, including Moutai, Luzhou Laojiao, Xiaohutuxian etc,The tobacco industry includes the provincial-level China Tobacco Industrial Corporation under China National Tobacco Corporation, among which the specific customers include Chongqing, Guizhou, Zhangjiakou and other China Tobacco Corporations.

What is more noteworthy is that Dashengda only started to enter the field of high-end tobacco and alcohol packaging in 2022, which is only more than two years ago. This makes investors and the media more concerned about the reason for Fang Nengbin's retention this time.

On August 21, Dashengda announced that the company had nominated and authorizedDirector Fang Congyi will act on behalf of Fang Nengbin as the chairman and legal representative.And perform the duties of a member of the relevant committee of the company's board of directors, and authorize Fang Congyi to sign relevant documents on behalf of the company.

According to "Wild Horse Finance",Fang Congyi is Fang Nengbin’s sister. She was born in July 1977 and is 47 years old this year. Their father Fang Wuxiao is the founder of Shengda Group and is known as the "Packaging King" in the industry.

According to Entrepreneur Daily, on January 28, 2013, on the occasion of the 30th anniversary of Shengda Group, Fang Wuxiao held a handover ceremony. Fang Nengbin, Fang Congyi, and Fang Nengbin’s wife Shen Lei collectively took over as the "second generation".Fang Nengbin is appointed as the chairman of the board of directors of the group company, Fang Congyi is appointed as the president of the listed company, and his daughter-in-law Shen Lei is appointed as the chairman of the supervisory board of the group company.。

Source: Company announcement

After completing the handover, Fang Wuxiao continued to work in Shengda Group as the group’s party secretary for another ten years, until January 28, 2023, the 40th anniversary of the company’s founding.

now,According to reports, only one and a half years after Fang Wuxiao resigned from the group, his son Fang Nengbin was detained for investigation. Can his daughter Fang Congyi lead Dashengda to a smooth transition?？

The successor who had been trained for 20 years was left behind

A week ago, Dashengda announced that the company's actual controller and chairmanFang Nengbin was detained and investigated by the Luoyang Xigong District Supervisory Committee。

Dashengda stated that the company's other directors, senior management and supervisors are performing their duties normally, the company's board of directors is operating normally, and the company's financial and production and operation management are normal.

Source: Company announcement

For Dashengda, Fang Nengbin's inheritance of his father's business is not a simple parachuting in, but a son who is highly expected by his father Fang Wuxiao and has been carefully cultivated for 20 years. Now that the "leader" Fang Nengbin has been retained, whether Dashengda can have a smooth transition depends on the response of Fang Wuxiao, who has already retired, and Fang Congyi.

As children of the "packaging king" Fang Wuxiao, Fang Nengbin and Fang Congyi have been interested in the factory founded by their father since they were very young. A report in Entrepreneur Daily mentioned that Fang Nengbin and Fang Congyi "grew up among piles of cardboard boxes, went to the factory after school and stayed in the factory on weekends."

Fang Wuxiao also values ​​his children very much, especiallyFang Nengbin specially formulated four "five-year plans", namely "work for five years, study for five years, teach for five years, and observe for five years", which lasted for twenty years from 1989 when Fang Nengbin graduated from high school and joined the factory.。

During this period, Fang Nengbin worked as a front-line worker for five years, and was his father's full-time driver and "personal secretary" for five years. He was then arranged by his father to lead a team and cooperate with the company's strategy to build a production base. In the fourth "five-year period", Fang Nengbin tried to take the lead alone and was fully responsible for the group's new investment segment - the textile business. After experiencing losses in the previous few years, it finally achieved profitability.

Currently, Dashengda’s investment sector still includes a company in the textile and garment industry, Hangzhou Yongchang Weaving Co., Ltd. This company is a wholly-owned subsidiary of Dashengda, and its executive director and general manager are both Fang Nengbin.

Source: Enterprise Early Warning

Since I graduated from high school and entered the factory, Fang Nengbin has been with Shengda for 35 years. Shengda started from the paper packaging business. , has developed into a variety of industries including paper packaging, pulp and paper, textiles, chemicals, petrochemical trade, etc.But the most eye-catching business is the fine tobacco and alcohol packaging business。

Some media reported that Fang Nengbin was detained.Qiao Luyu, chairman of Jinjia Co., Ltd. (002191.SZ), a peer of Dashengda, has been detained many times in recent years due to anti-corruption efforts in the tobacco system.

However, when responding to investors' inquiries, Dashengda's secretary stated that everything is subject to the announcement.

Give "Moutai", "Liqun" and other tobacco and alcohol merchants make packaging boxes,

Earned more than 80 million a year

From the perspective of the listed company Dashengda, Fang Nengbin has served as the chairman of Dashengda since December 2016 and has been in charge of the company's business strategy for many years.

Since Fang Nengbin took office as chairman,Dashengda's revenue almost doubled from 1.084 billion yuan in 2016 to 2.014 billion yuan in 2023；However, net profit has declined in recent years.Between 2016 and 2023, Dashengda had the highest net profit in 2020, reaching 279 million yuan, but the net profits in 2021, 2022 and 2023 were 97.55 million yuan, 105 million yuan and 88.55 million yuan respectively.

It can be clearly seen from Dashengda’s financial report thatDashengda attaches great importance to the high-quality tobacco and alcohol packaging business, taking "deepening large packaging and expanding fine packaging" as the main strategy to achieve the 2023 goal,It also stated in the financial report that the "benefits of premium tobacco and alcohol packages are evident and profitability is further enhanced."

Source: Company financial report

But in fact, Fang Nengbin has only entered the market for high-end tobacco and alcohol packaging for more than two years.

It is understood that Fang Nengbin has repeatedly stressed the need to optimize the customer structure and increase the proportion of orders from major customers of tobacco and alcohol companies.In the 2022 financial report, Dashengda proposed for the first time to expand into the field of fine tobacco and alcohol packaging。

"Mustang Finance" found out that:On January 28, 2022, Dashengda acquired 60% of the equity of Sichuan Dashengda Zhongfei Packaging Technology Co., Ltd. (hereinafter referred to as "Sichuan Dashengda Zhongfei"), thus officially entering the high-end wine packaging business,Sichuan Dashengda Zhongfei's main business is toWe provide wine box packaging and gift box packaging to customers such as Moutai Co., Ltd., Guizhou Xijiu, and Luzhou Laojiao.

Image source: Canned Image Library

On March 31, 2022, Dashengda acquired another 6% stake in Zhejiang Aider Packaging Co., Ltd. (referred to as "Aider") and included it in the scope of consolidated financial statements, allowing Dashengda to enter the field of high-end cigarette packaging.

According to "Wild Horse Finance",At present, Dashengda's premium cigarette packaging business is mainly undertaken by its subsidiary Ideal, which has established long-term cooperative relations with Zhejiang China Tobacco and Jiangsu China Tobacco, and provides trademarks and cartons for well-known cigarette brands such as "Liqun" and "Nanjing"., some gift packaging products are indirectly exported to the European and American markets.

In addition, Dashengda also stated that it would continue to participate in the bidding of China Tobacco Corporation nationwide in 2024 to further expand the market share of the cigarette packaging business.At present, we have successfully developed China Tobacco Corporation customers in Chongqing, Guizhou, Zhangjiakou and other places.

Dashengda's high-end wine box business is still undertaken by its subsidiary Sichuan Dashengda Zhongfei, which currently mainly produces high-quality wine boxes for downstream liquor brand customers such as Moutai, Guizhou Xijiu, and Luzhou Laojiao. Dashengda said that the company has been rated as an excellent supply partner, core supplier, and excellent supplier by Guizhou Moutai, Luzhou Laojiao, and Xiaohutuxian.

How much money did Dashengda make after taking over the packaging box business of tobacco and alcohol merchants such as "Moutai" and "Liqun"?

The 2022 financial report shows that Sichuan Dashengda Zhongfei and Aider paid dividends and profits of approximately 20.1292 million yuan to minority shareholders in 2022; In 2023, Sichuan Dashengda Zhongfei and Aider will distribute a total of approximately RMB 23.55 million in dividends to minority shareholders.

also,In 2022 and 2023, Sichuan Dashengda Zhongfei and Aider, which do packaging box business for Moutai, Liqun and other tobacco and alcohol merchants, contributed a total revenue of approximately 605 million yuan and a total net profit of approximately 154 million yuan, and the parent company Dashengda also profited from it.

Source: Company financial report

Dashengda said that with the gradual release of new orders from customers for premium cigarette packages, the revenue and profits of premium cigarette packages have steadily increased.

It is worth noting that the procurement of raw and auxiliary materials for Aider and Sichuan Dashengda Zhongfei is independently responsible by their respective procurement departments.

Dashengda also mentioned that the entry threshold for customers of fine cigarette packages and high-end wine packages is very high. Taking fine cigarette packages as an example, in addition to the promotional and packaging functions, the products also have anti-counterfeiting functions. The downstream customers are all provincial-level China Tobacco Industrial Corporation under the China National Tobacco Corporation. The procurement of cigarette labels is usually carried out through bidding. The entry threshold for suppliers is extremely high, and their cigarette label suppliers will not be easily replaced.Dashengda said that these high-quality and stable customer resources the company possesses give it a competitive advantage in the industry.

Song Qinghui, a famous economist, said that the anti-corruption campaign in tobacco industry has far-reaching impact on downstream packaging suppliers.Once a company executive is investigated, the listed company will also be labeled and implicated, thus affecting its normal business operations.; Secondly, the anti-corruption campaign in the tobacco industry will directly affect the orders of these packaging suppliers, and thus their performance; finally, the industry in which they are located may also be reshuffled as a result.

On the day when the news of Fang Nengbin's detention was announced, Dashengda's stock price plummeted by 9.95%. It fell for three consecutive days from August 14 to August 16, and the stock price dropped from 6.63 yuan per share at the close on August 13 to 5.63 yuan per share. As of the time of publication on August 22, Dashengda’s stock price fell 1.7%, closing at 5.78 yuan per share, with a total market value of approximately 3.179 billion yuan.

Source: Stock price chart of Eastmoney.com

Song Qinghui said that although detention is not equivalent to a determination of illegality or crime, Fang Nengbin's detention still has a huge impact on the company. In the long run, there is still a risk of a significant impact on Dashengda's overall business. For listed companies, the board of directors needs to make timely adjustments to minimize the impact, especially in terms of major decisions, and strive to ensure that the company is on the right track in terms of operations.

After Fang Nengbin was detained this time, what changes will Dashengda's tobacco and alcohol packaging business undergo? We will continue to pay attention.