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author | xu changqing

editor: wu lijuan

source | yema finance

huazhi liquor store, which sells famous liquors, recently made a "big move".

on the evening of september 5, huazhi liquor co., ltd. announced a dividend plan, proposing to pay a cash dividend of rmb 3.92 (including tax) for every 10 shares, with the equity registration date being september 11, 2024, and the ex-rights and ex-dividend date being september 12, 2024. after the announcement, the stock price did not boost, and on september 6, huazhi liquor co., ltd. closed down 1.62%, with a market value of 5.068 billion yuan.

at present,wu xiangdong, the "godfather of baijiu", is the actual controller of the company. he indirectly holds about 58% of the shares through three companies. based on this calculation, the dividends are quite generous.。

huazhi liquor store chose to distribute dividends at this time, and investors speculated that it was because the second quarter was the off-season for liquor sales and the published data was not good.

there is no doubt that wine companies make money, but platform-type companies that sell wine have not become "gold diggers and shovel sellers" who make a lot of money. as the "first stock in domestic wine circulation", huazhi liquor store (300755.sz) recently disclosed its semi-annual report. its operating income in the first half of 2024 was about 5.943 billion yuan, an increase of 1.3% year-on-year; the net profit attributable to shareholders of listed companies was about 155 million yuan, an increase of 2.77% year-on-year. looking at the semi-annual report alone, huazhi liquor store's performance is quite satisfactory, but if we look at the first and second quarter financial reports together, the spring festival peak season has a huge impact, and the second quarter is too "light".

huazhi liquor co., ltd.the net profit growth in the first half of the year was mainly due to the contribution of the first quarter.existin the second quarter, huazhi liquor co., ltd. achieved revenue of only 1.81 billion yuan, a year-on-year decline of 14.77%.the net profit attributable to the parent was 25 million yuan, down 49.1% year-on-year, nearly halving.

although huazhi liquor co., ltd.'s revenue exceeded 10 billion yuan for the first time in 2023, judging from the data in this year's semi-annual report, it should also exceed 10 billion yuan by the end of the year.the share price has dropped from a high of 54.67 yuan per share in 2021 to 12.16 yuan per share today (as of the close of september 6).at the same time, the actual controller of huazhi liquor store, known as the "godfather of liquor" in the industry,wu xiangdong's net worth has shrunk by about 10 billion. the increase in revenue but the lack of a rise in stock price may be related to the company's profit fluctuations and investors' predictions about the company's future development prospects.

gross profit margin declines year by year

dividends restore confidence

in the second quarter, huazhi liquor's revenue and net profit margin both declined month-on-month, seriously eroding its net profit. in terms of the off-season for liquor, the second quarter of each year is not a key time period for companies in the liquor industry chain to "rush for performance". overall, q2 revenue does not account for a large proportion of the entire year.

however, with the liquor industry under pressure, the fate of huazhi liquor store, as a liquor distribution company, has also risen and fallen with the market - on the one hand, it boasts of having more than 30,000 high-quality retail outlets, revenue exceeding 10 billion yuan, and plans to open another 3,000 3.0 stores within five years, while on the other hand, its gross profit margin is not satisfactory.

according to data from previous years,from 2018 to 2021, the gross profit margins of huazhi liquor store were 21.36%, 21.39%, 19.07% and 20.96% respectively.judging from the data, the epidemic, a "black swan event" that hit most of the real economy, did not have much impact on huazhi liquor. however, by 2022, the gross profit margin dropped to 14.03%, and this figure further declined to 10.75% in 2023, which is only half of that in 2019.in the first half of 2024, its gross profit margin is 10.5%.the gross profit margin of the liquor business further dropped to 9.36%, the lowest level since its listing. the impact of the epidemic has gradually faded, so why is it difficult for huazhi liquor to reverse the decline in profits?

source: canned food gallery

the reason for this is that upstream wine companies continue to increase their ex-factory prices, which leads to rising costs, while downstream customers' willingness to purchase goods in the future has decreased, resulting in limited increase in their revenue, putting pressure on gross profit margin.

this can also be seen from the company's net operating cash flow in the second quarter. in the second quarter of this year, the company's net operating cash flow was -486 million, a significant decrease of 648.94% year-on-year.cash paid for purchases from famous liquor companies and increase in inventoryon the other hand, from large ka storesthe collection of funds from downstream channels has also slowed down, accounts receivable of 353 million, an increase of 14.39% year-on-year.

in the face of the decline in performance in the second quarter, huazhi liquor co., ltd. said: "it is mainly due toafter the spring festival, the sales season begins and consumer demand is weak, the company took the initiative to adjust its product sales structure and marketing policy,increase the sales share of famous wines and increase market investment in fine wines, plus the rising cost of purchasing some famous wines, which has an impact on profits.”

lacking the right to speak to both upstream and downstream, huazhi liquor co., ltd.'s situation was likened by investors in the stock bar to being "sandwiched" and "attacked from both sides". facing an uncertain future, confidence is more important than gold. as the stock price continued to fall, huazhi liquor co., ltd. chose to pay dividends.

as early as july this year, huazhi liquor co., ltd. announced that it would issue its first special dividend in an attempt to boost investor confidence. it plans to use the existing total share capital minus the repurchased shares in the repurchase special account as the base.a cash dividend of rmb 3.92 (including tax) per 10 shares is expected to be rmb 160 million (including tax).; no bonus shares will be issued and no capital reserve will be converted into capital stock.

according to the plan, the record date for this dividend is september 11, 2024, and the ex-rights and ex-dividend date is september 12, 2024. sufficient time has been reserved, and it is expected to attract many investors.generous dividend conditions can attract short-term investors, but if huazhi liquor store wants to attract the attention of long-term investors, it needs to "strengthen its own tools".

channel advantages are impacted

extending to the upstream and downstream of the industrial chain

the liquor business is the main contributor to huazhi liquor company's revenue.the company's liquor products achieved revenue of 5.585 billion yuan, accounting for about 94% of total revenue.in addition to the impact of the domestic liquor industry entering a period of deep adjustment, from an internal perspective, the rise of direct sales by leading liquor companies has also impacted huazhi liquor's distribution business model.

founded in 2005, huazhi liquor co., ltd. obtained the agency rights of wuliangye (000858.sz) vintage liquor in 2006, and obtained the agency rights of kweichow moutai (600519.sh) in 2009. with the agency rights of two major liquor companies, huazhi liquor co., ltd.'s development can be described as smooth sailing.

in 2019, huazhi liquor co., ltd. was officially listed on the shenzhen stock exchange, becoming the "first stock in liquor circulation."at the april 2021 earnings conference, the chairman of huazhi liquor co., ltd. disclosed that 70% of the company's revenue came from moutai and wuliangye.however, it is precisely because of the over-reliance on famous liquors that any market fluctuations will directly cause fluctuations in gross profit margins and profit margins.

wu xiangdong, the founder of huazhi liquor store, once proposed to "always be a gold medal waiter of a famous liquor factory." but in fact,since famous liquors have extremely strong pricing power and downstream prices are gradually becoming transparent, the profits that can be retained by the channel are not much.

moreover, although the traditional distributor system is like a huge network, covering a wider area, deeply rooted in local culture and consumption habits, and can provide more detailed customer service and brand experience. however, as the liquor industry enters a period of deep adjustment, major wineries have begun to try to build a direct sales channel system and have more market dominance. direct sales mean that manufacturers face consumers directly, reducing the middlemen, which can theoretically reduce costs and increase profit margins. for consumers, they are also more willing to go to the middleman to get more affordable prices.

xiao zhuqing, an independent commentator in the wine industry, believes that the entire wine distribution industry is currently in a stock competition market, and consumption is only so large, so major wine distribution companies are actively extending in both directions. extending upward is to create their own brands: developing exclusive sales barcodes with major famous wine factories, increasing gross profit margins through exclusive sales products, expanding the amount of cost investment through exclusive sales, and obtaining greater benefits through exclusive sales pricing power.

moutai's 2023 financial report shows that last yearkweichow moutai's direct sales revenue was 67.233 billion yuan, a year-on-year increase of 36.16%, at the same timewholesale channel revenue was 79.986 billion yuan, a year-on-year increase of 7.52%in 2023,wuliangye's distribution model revenue was 45.985 billion yuan, and its direct sales model revenue was 30.462 billion yuan, up 13.56% and 12.53% year-on-year respectively.in addition, luzhou laojiao and other leading wine companies are also planning direct sales, and the proportion of direct sales revenue is increasing. this undoubtedly weakened the core competitiveness of huazhi liquor.

source: canned food gallery

in addition, the advent of the new retail era has led to the rapid rise of huazhi liquor store's competitors. for example, o2o liquor vertical e-commerce platforms such as 1919, jiuxian.com, and jiubianyi are all important players in this field, and the competition is even becoming fierce.

in the low-profit cycle, huazhi liquor store did not sit idly by. the company's current strategy is to"chain stores + personalized products + boutique wine" model: in terms of chain stores, it also said that it is upgrading its stores to the 3.0 model of "famous wine + high-end catering + entertainment ecology"; in terms of personalized products, in addition to selling products such as moutai, wuliangye and penfolds wines, it also conducts corresponding customized product development with these companies; for boutique wines, it establishes a matrix with brands such as lotus and lai gaozhun.

source: canned food gallery

among all the fine wines, lotus wine is one of the core fine wines sold by huazhi wine. however, the financial report shows that in 2023, lotus data technology co., ltd. achieved revenue of 247 million yuan, a year-on-year decrease of 41.49%, and net profit of 19.77 million yuan, a year-on-year decrease of 31.45%;both revenue and net profit fell sharply, and it is obvious that the market performance of lotus wine is not impressive.

however, as the first listed liquor company, huazhi liquor co., ltd. has multiple advantages such as the agency rights for famous liquors, self-developed products, sales scale and national channel network. it is in line with the development trend of digitalization, chain operation and specialization of domestic liquor distribution channels, and may have good growth space in the future market.

xiao zhuqing believes that the breakthrough is limited to opening stores in large cities and penetrating into counties or economically developed towns. on the one hand, it is to use the management model/management platform of chain enterprises and the operation experience of private domain traffic.by utilizing the quota of famous liquor agency rights obtained by the distribution enterprises, the strong products can drive the franchised products, and in this way, the upstream and downstream can be extended., is the future development trend of distribution companies represented by huazhi liquor.

the value of the "godfather of baijiu" has shrunk

or integrated attack

wu xiangdong was born in liling, hunan in 1969 and is now 55 years old. he had an indissoluble bond with wuliangye in his early career. in 1996, the 27-year-old wu xiangdong won the agency rights of sichuan liquor king under wuliangye, and in just one year, sichuan liquor king became the number one in hunan in sales.

source: canned food gallery

this laid the foundation for the cooperation between wu xiangdong and wuliangye. with the fierce competition in the market, the life of distributors became more and more difficult, and wu xiangdong came up with the idea of ​​creating his own liquor brand. so, at the end of 1998, the first bottle of jinliufu rolled off the production line at wuliangye distillery, which also meant that wu xiangdong created a unique oem model in the liquor industry. the china times once reported that from 1998 to 2005, in just 7 years, jinliufu's sales exceeded 2.9 billion yuan. at the end of 2008, jinliufu's turnover exceeded 6 billion yuan, second only to moutai and wuliangye, firmly sitting in the third place in the liquor industry.

in 2006, wu xiangdong changed the name of "jinliufu enterprise" to huaze group, and got involved in finance, cultural tourism, new energy, internet, wine and other industries. in 2015, wu xiangdong sold 50.41% of jinliufu's shares to xinhualian. it is worth mentioning that his brother-in-law is fu jun, chairman of xinhualian group. in 2016, huaze group was officially renamed "jindong group". since then, wu xiangdong is no longer satisfied with oem production and began to enter the field of liquor production and manufacturing.

existfrom 2001 to 2012, wu xiangdong entered 17 wine production companies through acquisition, equity participation or controlling., among which there are 12 liquor companies. these include zhenjiu from guizhou and lidu from jiangxi. later, the four major brands of zhenjiu, lidu, xiangjiao and kaikouxiao were packaged together.liduthe group will be listed in 2023.became the only newly listed liquor company in the past 8 years, with the multiple halos of "the first liquor stock in hong kong stocks" and "the second chinese sauce-flavored liquor stock".

in addition to entering the field of liquor production and manufacturing, wu xiangdong also entered the field of liquor terminal circulation. in 2005, he founded huazhi liquor store. the first store of huazhi liquor store was opened in wu xiangdong's hometown of liling. the liquor distribution business, to put it simply, is a bridge between liquor companies and consumers, selling goods from the winery to consumers or terminal stores. in 2019, huazhi liquor store was successfully listed on the shenzhen stock exchange, becoming china's first a-share listed company in the liquor distribution field.

judging from his past performance, wu xiangdong deserves the title of “godfather of liquor”.from jinliufu to huazhi liquor store, and then to zhenjiu lidu, wu xiangdong has demonstrated his brand and channel operation capabilities, industrial integration capabilities, and capital operation capabilities.however, during the entire downward cycle of the liquor industry, wu xiangdong's net worth inevitably shrank.

it is not easy for zhenjiu li du to achieve double growth in performance under the current difficult situation. however, in the secondary market, its stock price fell by about 35% compared with the issue price, and its market value evaporated by about hk$13 billion.

however, the "godfather of baijiu" seems to be taking the initiative. at the 2024 chengdu spring sugar fair, wu xiangdong integrated his own baijiu company jinliufu with shaanxi taibai, anhui linshui, shandong jinyuanchun, hunan yanfeng, guangxi xiangshan, jilin yushuqian, guangdong wubi and other liquor brands to form the jinliufu holding group.

some people in the liquor industry analyzed that this is wu xiangdong integrating his assets and preparing to create the next liquor "trump card".