news

Tencent News "Periscope"

Author: Feng Biao Editor: Liu Peng

As a leading domestic grain and oil companyGolden ArowanaIn the first half of 2024, Golden Dragon Fish's operating income exceeded 100 billion yuan, but its net profit margin was only 1%. Moreover, since Golden Dragon Fish went public, its "ability to make money" has been significantly weaker than before it went public.

Golden Dragon Fish was once hotly speculated in the capital market. After it was listed at 25.70 yuan per share in 2020, its stock price soared rapidly, once exceeding 145 yuan per share. Its market value peaked at more than 780 billion yuan, but now Golden Dragon Fish's total market value is only about 140 billion yuan, a decrease of 640 billion yuan from its historical high.

The full name of Golden Dragon Fish is Yihai Kerry Golden Dragon Fish Company. Its parent company is Wilmar International registered in Singapore. Its major shareholders are the famous Malaysian Chinese richest man, "Asian Sugar King" Kuok Ho-nian and his nephew Kuok Khoon Hong. As early as the 1990s, Kuok Khoon Hong began to lay out grain, oil, flour, oil technology and other industries in China, and led the consumption model change from bulk oil to small packaged oil.

Faced with a sharply reduced market value, the controlling shareholder of Golden Dragon Fish said it would voluntarily extend the lock-up period of restricted shares before the IPO by one year in an attempt to boost investor confidence. However, the question of how to improve profitability remains to be answered.

Net profit continued to decline after listing, and the number of dealers fell for the first time in the first half of the year

In the first half of 2024, Golden Dragon Fish achieved operating income of 109.478 billion yuan, a year-on-year decrease of 7.78%, and net profit of 1.097 billion yuan, a year-on-year increase of 13.57%.

However, out of the 1.097 billion net profit, non-recurring gains exceeded 900 million, and the net profit after deducting non-recurring gains was only 160 million. Among the non-recurring gains and losses totaling over 900 million, the gains from derivatives and structured deposits used as hedging were 1.029 billion.

Even the non-GAAP net profit of 160 million yuan has increased more than 10 times compared with the same period last year, because Jinlongyu's non-GAAP net profit in the first half of 2023 was only 14.427 million yuan.

In the past performance of Golden Dragon Fish, the amount of non-recurring gains and losses was relatively large. In this regard, Golden Dragon Fish explained that in order to reduce factors such as raw material prices and exchange rate fluctuations, the company used financial derivatives such as futures and forward foreign exchange contracts for hedging.

If we do not consider the non-recurring gains and losses of hedging, the operating cash flow of Jinlongyu also fluctuates greatly. In the first half of this year, the net operating cash flow of Jinlongyu was 1.636 billion yuan, compared with 10.733 billion yuan in the same period last year, a year-on-year decrease of 84.76%.

In fact, since Golden Arowana went public, it has experienced increased revenue but not increased profits for many years.

In 2017, 2018 and 2019 before its listing, Golden Dragon Fish's operating income was RMB 150.766 billion, RMB 167.074 billion and RMB 170.743 billion respectively, and its net profit was RMB 5.284 billion, RMB 5.517 billion and RMB 5.564 billion respectively.

In 2020, the year of its listing, despite the impact of the COVID-19 pandemic on the catering industry and the rise in prices of raw materials such as soybeans, Golden Dragon Fish achieved a revenue of 194.922 billion yuan and a net profit of over 6 billion yuan, with a net profit of 8.792 billion yuan after deducting non-recurring gains and losses. However, in the following years, although the scale of Golden Dragon Fish's operations has been growing, its ability to "earn money" has been declining year after year.

From 2021 to 2023, Golden Arowana's operating income reached 226.225 billion yuan, 257.485 billion yuan, and 251.524 billion yuan, respectively, but its net profit was 4.132 billion yuan, 3.011 billion yuan, and 2.848 billion yuan, respectively. The net profit in 2023 has been "halved" compared to the highlight of the year of listing, and the net profit margin has dropped from more than 3% before listing to less than 2% after listing.

In addition, the gross profit margin of Golden Dragon Fish has declined significantly in recent years. In 2020, the gross profit margin of Golden Dragon Fish exceeded 11%, but it dropped to 4.83% in 2023 and rebounded to 4.9% in the first half of this year. Compared with other listed companies in the same industry, the gross profit margin of Golden Dragon Fish is also relatively low, such as the condiment giantHaitian Flavor IndustryThe gross profit margin exceeds 30%, and COFCO Group's main grain and oil processingCOFCOThe gross profit margin exceeds 20%.

Regarding the fluctuations in performance before and after listing, Golden Dragon Fish explained to Tencent News' "Qianwang" that the profits fluctuated due to factors such as fluctuations in raw material prices, consumer demand, and market competition.

Another phenomenon worth noting is that the number of Jinlongyu dealers decreased for the first time in the first half of this year. The number of dealers from 2020 to 2023 was 5097, 6121, 7768 and 8722 respectively. In the first half of this year, the number of dealers decreased by 465 to 8257.

Regarding the decline in the number of dealers, Golden Dragon Fish responded that this was based on business development needs. The company will continue to conduct corresponding assessments of dealers and optimize some dealers with weak cooperation intentions and long-term poor performance. This also includes sorting out and merging multiple accounts of the same dealer. The change in the number of dealers has no impact on the company's business.

Falling prices squeeze profit margins, and the central kitchen project is still in the early stages of business

Among the business categories of Golden Dragon Fish, kitchen food including rice, flour and oil accounts for the largest proportion, and this business is most significantly affected by the price of raw materials. Since the beginning of this year, the prices of grain and oil raw materials such as soybeans have been on a downward trend. Data from the National Bureau of Statistics showed that the price of soybeans (soybeans) was around 4,800 yuan/ton in December 2023, and it had dropped to around 4,500 yuan/ton in June this year. However, the decline in raw material costs is not necessarily good for Golden Dragon Fish's profits.

Specifically, Golden Dragon Fish told Tencent News' "Qianwang" that its kitchen food sales in the first half of the year increased year-on-year. On the one hand, it benefited from the decline in raw material costs, and the gross profit margin and profit of products in the retail channel increased year-on-year; but on the other hand, the downward price squeezed the profit margin of products in the catering and food industry channels. Among them, the flour business suffered losses due to sluggish market demand, fierce competition and low prices of by-products.

In recent years, in order to get rid of the fierce competition in the homogeneous rice, flour and oil business, Golden Dragon Fish has tried to improve its profitability through diversified business layout. For example, Golden Dragon Fish has developed downstream condiments, daily chemicals, central kitchen parks and other businesses, and further combined downstream food processing with upstream agricultural product processing to become a comprehensive food processing company.

In recent years, Golden Dragon Fish has focused on the layout of central kitchen projects, which has attracted much attention from the market. In the central kitchen production park, Golden Dragon Fish not only processes central kitchen products by itself, but also introduces other central kitchen processing companies.

Regarding the current progress of the central kitchen business and whether it has achieved profitability, Golden Dragon Fish responded to Tencent News' "Qianwang" and stated that the central kitchen project is still in its early stages of business, but the company's central kitchen park business model is still developing in a positive direction. This model can effectively reduce the company's production, operation, transportation, sales and other operating costs, so in the long run, we are full of confidence in the central kitchen park business.

Currently, judging from the gross profit margins of Golden Dragon Fish’s different businesses, the gross profit margins of kitchen food and feed raw materials and oil technology are 6.86% and 1.01% respectively.

However, the gross profit margin of other businesses is as high as 22.61%. Jinlongyu told Tencent News "Qianwang" that other businesses include transfer income, energy sales income, waste material income and spare parts sales income, etc. Although the gross profit margin is high, it accounts for a small proportion.