news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

source | deepblue finance

written by yang bo

with the weakening of the domestic consumer market, the business of selling alcohol is also not doing well. recently, huazhi liquor store, the largest listed alcohol chain in china, disclosed its interim report, with both revenue and net profit in the second quarter falling year-on-year and month-on-month.

at the same time, huazhi liquor's net profit has declined for two consecutive years in 2022 and 2023. compared with the high level, the adjustment range of listed company's stock price is as high as 78%.

as the actual controller of huazhi liquor store, wu xiangdong, known as the "godfather of liquor" in the industry, has also seen his net worth shrink significantly.

1

performance not as expected

in the first half of 2024, huazhi liquor store achieved operating income of 5.943 billion yuan, a year-on-year increase of 1.30%; net profit attributable to shareholders of the parent was 155 million yuan, a year-on-year increase of 2.77%; non-net profit was 138 million yuan, a year-on-year decrease of 3.63%; net cash flow generated from operating activities was -60.1919 million yuan, compared with 422 million yuan in the same period last year, a year-on-year decrease of 114%.

if we look at the second quarter data alone, the performance is difficult. the company achieved total operating revenue of 1.81 billion yuan in the second quarter, a year-on-year decrease of 14.77% and a month-on-month decrease of 56.21%; net profit attributable to the parent company was 25.2998 million yuan, a year-on-year decrease of 49.10% and a month-on-month decrease of 80.50%; non-net profit was 9.8646 million yuan, a year-on-year decrease of 77.15% and a month-on-month decrease of 92.28%.

a closer look at the reasons for the performance change shows that the company's gross profit margin in the second quarter was 10.55%, down 2.36 percentage points year-on-year. the net profit margin was 1.34%, down 1.12 percentage points from the same period last year and 1.96 percentage points from the previous quarter.

therefore, in the second quarter, huazhi liquor store's revenue and net profit margin both declined month-on-month, seriously eroding its net profit.

as the no. 1 stock in the domestic liquor distribution industry, huazhi liquor co., ltd. is inevitably affected by the macroeconomic slowdown and adjustments in the liquor industry.

the peak of huazhi liquor store's liquor business came in 2021. in 2021, the company's operating income was 7.46 billion yuan, a year-on-year increase of 50.97%; non-net profit was 658 million yuan, a year-on-year increase of 92%.

however, in 2022 and 2023, the company's operating income continued to grow, but the growth rate of revenue slowed down significantly to about 16%. it is worth noting that the non-net profit in 2022 fell by 48.66% year-on-year, and the non-net profit in 2023 continued to fall by 46.86% year-on-year. the main reason behind this is the sharp decline in gross profit margin. in 2021, the sales gross profit margin was 20.96%, which dropped to 14.03% in 2022 and only 10.75% in 2023.

this means that in recent years, huazhi liquor store's business growth has declined significantly (business growth has stagnated), and its non-net profit has shown a large negative growth (because the gross profit margin has dropped significantly).

this situation also caused a large-scale correction in the share price of huazhi liquor store. in 2021, the highest share price was 54.56 yuan per share (before readjustment), and on september 2, it had fallen to 11.92 yuan per share.the maximum stock price correction ratio was as high as 78%, equivalent to a market value evaporation of approximately rmb 17.7 billion.

according to the 58.63% proportion of huazhi liquor store that wu xiangdong actually controls, wu xiangdong's net worth has shrunk by about rmb 10.3 billion compared to the peak period in 2021 just because of huazhi liquor store.

2

is wu xiangdong rushing for his third ipo company?

wu xiangdong also has a listed company, the no. 1 liquor stock in hong kong - zhenjiu li du (hk.6979).

on the evening of august 21, zhenjiu li du released its 2024 semi-annual report. during the reporting period, the company achieved operating income of 4.133 billion yuan, a year-on-year increase of 17.5%; adjusted net profit of 1.02 billion yuan, a year-on-year increase of 26.9%, and operating income and adjusted net profit achieved double-digit growth for consecutive years.it is not easy for zhenjiu li du to achieve performance growth under the current difficult situation.

this is mainly due to the revenue growth achieved by zhenjiu lidu in the "sub-high-end" price range. in particular, zhenjiu achieved revenue of 2.702 billion yuan in the first half of the year, a year-on-year increase of 17.2%, accounting for 65.4% of the total revenue, and ranked among the top three sauce-flavored liquors in guizhou.

on april 27 last year, zhenjiu li du was successfully listed on the hong kong stock exchange. the issue price was hk$10.82 at the time, and the amount of funds raised was approximately hk$5.31 billion. as of the close of september 2, the latest share price of zhenjiu li du was hk$6.97 per share (after adjustment).compared with the issue price, the stock price dropped by about 35%, and the market value evaporated by about hk$13 billion.

the largest shareholder of zhenjiu li du is jindong investment group co., ltd., which holds 69% of the shares. the actual controller is wu xiangdong (who holds 90% of jindong investment after equity penetration). a rough estimate shows that wu xiangdong's net worth has shrunk by about hk$8 billion since the listing of zhenjiu li du.

wu xiangdong's relationship with liquor began with a product called "sichuan liquor king" under wuliangye. in 1996, wu xiangdong founded changsha haida liquor and food wholesale co., ltd. and became the hunan agent of sichuan liquor king. wu xiangdong was very capable and became the sales champion in the hunan market in the first year of his agency. in 1997, he successfully became the national general agent of sichuan liquor king.

the real turning point came from his pioneering creation of the "jinliufu" brand.

in early 1998, wu xiangdong stopped being the agent of sichuan liquor king and founded the jinliufu brand on his own. wu xiangdong found wuliangye group and reached an oem buyout agreement. wu xiangdong was responsible for brand operation and sales, while wuliangye was responsible for oem production.

in the era when traditional media held absolute discourse power, wu xiangdong successfully promoted the "jinliufu" brand through advertising bombardment on tv and other media. jinliufu has many classic advertising slogans, such as "chinese people's lucky wine - jinliufu" and "good life cannot be separated from it - jinliufu wine". many people may still remember it.

combined with the expansion of offline channels, jinliufu succeeded. public data shows that in 2000, jinliufu's revenue exceeded 900 million yuan, and in 2001, jinliufu achieved sales revenue of 1.4 billion yuan. in 2003, sales reached 1.8 billion yuan, in 2004, sales revenue exceeded 2 billion yuan, and in 2008, jinliufu's sales revenue exceeded 6 billion yuan.

with the success of jinliufu, wu xiangdong began to experiment on the channel side, which was the predecessor of the liquor chain huazhi liquor store.

since then, wu xiangdong has frequently acquired and invested in liquor companies in the liquor market, such as the acquisition of xiangjiao liquor in 2003, jiangxi lidu in 2008, and guizhou zhenjiu in 2009.

at that time, most of these wine companies were in a situation of poor management and weak brand power. many people thought that it was difficult to integrate these small wineries and that wu xiangdong was at great risk. but facts have proved that wu xiangdong's title of "godfather" was not obtained out of thin air.

for example, guizhou zhenjiu was just an unmanned sauce wine factory before 2009. wu xiangdong acquired the controlling rights through auction. after the acquisition, wu xiangdong invested several billion yuan to build the brand, expand production capacity, and eventually made zhenjiu one of the top three sauce wines in guizhou.

the strength of wu xiangdong lies in the fact that he not only understands the market, marketing, and channels, but also capital operations.

now, wu xiangdong has a new capital movement. in may 2023, jinliufu formed hunan jinliufu holding group with shaanxi taibai, anhui linshui, shandong jinyuanchun, hunan yanfeng, guangxi xiangshan, jilin yushuqian, and guangdong deqing wubi. this move is widely speculated by the outside world.wu xiangdong may once again replicate the model of zhenjiu li du and package it to rush for the third listed company.