Large Shareholder "Haiyin" Maotai Liquor Guizhou Maotai'S Double-Digit Growth In The First Half Of The Year Is Not Easy

Since last year, Guizhou Maotai (600519. SH) performance growth is gradually slowing down, especially this year's superimposed impact of the new crown pneumonia epidemic.

However, within the Maotai Group, the related party transactions between the major shareholders and the listed company Guizhou Maotai are gradually increasing. Guizhou Maotai, as the earliest and most effective local state-owned enterprise under Maotai Group and even in Guizhou Province, is constantly producing spillover effects for the economic growth of the whole province and the performance growth of its parent company.

On July 28, the most anticipated semi annual report of China's liquor industry was published: in the first half of the year, the business income of Maotai in Guizhou Province exceeded the 40 billion yuan mark for the first time, reaching 43.9 billion yuan, an increase of 11% over the same period of last year. The year-on-year growth rate of net profit was faster than that of revenue, reaching 13%, reaching 22.6 billion yuan. Although the growth rate was slower than the performance growth in the first quarter, liquor leading enterprises still achieved double-digit results under the sustained high-scale and high profit, which was not easy.

However, contrary to the sharp reduction of related party transactions criticized by small and medium shareholders in Wuliangye, Shanxi Fenjiu and Changyu shares in recent years, the growth rate of related party transactions between Maotai Group and Guizhou Maotai is accelerating.

In the first half of last year, the amount of related party transactions in Guizhou Maotai totaled 1.8 billion yuan, accounting for 4.5% of Guizhou Maotai's revenue in the same period. According to this year's Guizhou Maotai semi annual report, the amount of related party transactions of 4 billion yuan accounted for 9% of Guizhou Maotai's revenue in the same period, which doubled year-on-year. Most of the related party transactions were generated by subsidiaries of Maotai Group.

In addition to Maotai Group, other state-owned enterprises in Guizhou Province are also taking a ride. At the end of last year, according to the notice of the state owned assets supervision and Administration Commission of Guizhou Province, through free transfer, Guizhou state owned Capital Operation Co., Ltd. obtained 4% of the shares of Guizhou Maotai Group and became the third largest shareholder of Guizhou Maotai.

Guizhou industry relies on tobacco and alcohol, just as Chongqing industry cannot do without cars. In the first half of the year, only five of the top ten industrial industries in Guizhou Province had accumulated positive growth in industrial added value. Among them, the growth rate of high-quality tobacco wine was as high as 7.3%.

In the first half of the year, Guizhou's GDP was less than trillion yuan, which was not as good as the neighboring Guangxi and Yunnan, ranking sixth in the 12 western provinces, cities and autonomous regions. Its growth rate ranked third with Gansu Province, with a year-on-year increase of 1.5%. In the process of catching up, the prominent position of tobacco and alcohol industry will continue for a long time.

Maotai Group drinks Maotai Liquor by sea

Maotai Group is a large local state-owned enterprise in Guizhou Province. Last year, the group's revenue of 100 billion yuan was largely inseparable from Guizhou Maotai.

In addition to the sales contribution of its subsidiaries, including Guizhou Maotai, increasing the related party transactions year by year is also a major reason for its development and growth.

Since the implementation of marketing system reform of Maotai liquor in the era of Li Baofang, Maotai Group, which does not produce Maotai liquor, has participated in the reform, which has caused many discussions in the investment circle. Last year, Guizhou Maotai Marketing Group Co., Ltd. was established. As a wholly-owned subsidiary of Maotai Group, its registered capital is 1 billion yuan, which is far greater than the registered capital strength of Guizhou Maotai Liquor Sales Co., Ltd. (hereinafter referred to as Maotai liquor sales company).

The semi annual report of 2020 disclosed that in the first half of the year, the group marketing company's sales of Guizhou Maotai's related party transactions amounted to 2.1 billion yuan, accounting for half of the related party transactions of Guizhou Maotai in the same period.

According to the announcement issued by Guizhou Maotai in response to the regulatory working letter of Shanghai Stock Exchange in August last year, the amount of related party transactions of the group marketing company in 2019 shall not exceed 5% (5.6 billion yuan) of the net assets of Guizhou Maotai at the end of 2018. As a result, the amount of related party transactions between the group marketing company and Guizhou Maotai was only 1.57 billion yuan last year due to the postponement of the implementation of the purchase and sale of liquor.

Before the establishment of the group marketing company, the largest related party of Maotai in Guizhou was the e-commerce company of Maotai Group. The peak is 2017, and the sales volume of e-commerce companies is 2 billion yuan. This transaction was terminated after the decline of e-commerce.

Maotai Group's online liquor sales channel is interrupted. The newly established group marketing company focuses on end customers such as group purchase and supermarket. The scale of liquor sales is larger. In the first half of this year alone, the sales volume of Maotai Group and Guizhou Maotai exceeded that of last year's whole year.

This year, the number of related party transactions of group marketing companies selling alcohol is still unknown. According to 5% of the net assets at the end of last year, it was 6.8 billion yuan.

In addition to the Group Marketing Company replacing the former e-commerce company to become the largest subsidiary of Maotai Group and listed companies, the Maotai airport controlled by Maotai Group sells liquor, the group cultural and tourism company sells liquor, and the technology development company sells liquor. The group's wholly-owned subsidiaries Beijing Maotai trading company and Shanghai Guizhou Industrial Co., Ltd. also sell Maotai liquor.

From raw material procurement to goods transportation, from brand use to sales of Maotai liquor, the related party transactions between Maotai Group and Guizhou Maotai run through the whole liquor industry chain.

Maotai Group's subsidiaries get more loans from Guizhou Maotai holding finance company, which is another way of blood transfusion.

According to the semi annual report, from January to June, the net cash flow from operating activities in Maotai, Guizhou, was 12.6 billion yuan, down 47% year on year. The company explained that this was due to a decrease in the increase in deposits and an increase in loans in member units of the finance company. At the end of the first half of the year, the financial company issued loans and advances of 2.96 billion yuan to member units, 100 times that of the beginning of the period. Among them, Maotai Group also obtained a credit loan of 3 billion yuan from Guizhou Maotai. During the epidemic period, Guizhou Maotai holding financial company played a very active role in the internal financing leverage of the group.

Maotai Group has made more profits from Maotai Group's loans in previous years.

It is the controlling shareholder of Maotai, Guizhou. Last year was the largest amount of cash dividends in Maotai, Guizhou. Maotai Group is also a minority shareholder in Maotai liquor sales company, holding 5% of the company. In the first half of this year, Maotai liquor sales company, the main sales body of Maotai liquor, achieved a net profit of 20 billion yuan with a revenue of 38 billion yuan, and declared a dividend of nearly 1.8 billion yuan to Maotai Group. From 2014 to 2018, the net profits of Maotai liquor sales company were 16.4 billion yuan, 16.6 billion yuan, 19.3 billion yuan, 22.4 billion yuan and 30.8 billion yuan respectively.

The strategy of "curve" price increase in Maotai, Guizhou

Under the epidemic situation, it is not easy to achieve double-digit growth in half a year.

Maotai, Guizhou, is also under pressure. During the two sessions of the National People's Congress this year, Gao Weidong, chairman of Maotai Group, said that in the early stage of the spread of the epidemic, Maotai was also affected to varying degrees in the aspects of raw material procurement, logistics distribution and marketing. Later, under the strong leadership of the Guizhou Provincial Party committee and the provincial government, the epidemic situation was prevented and controlled, and work was resumed on the other hand To the minimum.

Maotai Group took the lead in resuming production in the whole industry on February 13. At the end of March, it realized full load production and national market resumption, and finally achieved a good start in the first quarter.

What is the driving force of Maotai's growth?

The semi annual report shows that the revenue growth of Maotai liquor in the first half of the year mainly comes from the adjustment of channels and the change of product structure.

There is no big opening. This year, the sales volume of Maotai liquor is the same as that of last year. As early as the end of last year, Li Baofang, former chairman of Guizhou Maotai, said that the total output of Maotai liquor in 2020 would be about 34500 tons, including 2000 tons in overseas markets.

The major growth comes from channel adjustment, and the marketing system reform of Maotai in Guizhou has entered the deep water area. According to the semi annual report, in the first half of the year, the main business income of Maotai in Guizhou reached 5.15 billion yuan, accounting for 11.7% of the revenue. As early as the first quarter, the company's direct sales revenue reached 1.9 billion yuan, almost double the same period last year. Commercial supermarkets, Ka stores, airports, high-speed railway stations and diversified social channels intensively opened up and put into operation have greatly expanded the sales mode of Maotai liquor and increased the company's revenue and profitability. In the first half of the year, its direct sales revenue accounted for more than 10% of revenue for the first time.

It is no longer a direct supplier of Maotai liquor at a high price of 969 yuan. For the "Maotai" company, the profit rate of Maotai has not been increased due to the increase in the ex factory price of Maotai liquor.

From this point of view, the expansion of direct sales directly increased profits in the case of Guizhou Maotai's annual sales almost no growth. However, according to the information released by Guizhou Maotai, the liquor sold by the company to the group marketing company is the same as the purchase price of other non affiliated distributors. In other words, the more Maotai liquor a listed company sells to the group, the less Maotai liquor it enjoys at the direct selling price.

In order to increase the potential, Guizhou Maotai also began to ban the traditional Maotai liquor dealers. In the first half of the year, Guizhou Maotai banned 34 Maotai liquor dealers. At the same time, the quantity of Maotai liquor was increased. This part is used to increase the supply of direct sales, which is also an increase in profits.

In order to achieve double-digit growth, Maotai, Guizhou, spared no effort. Product structure adjustment is the second way to increase the price of Maotai liquor. From the semi annual report of last year, the main performance indicators continued to grow by double-digit, and began to rely on the change of sales structure. In addition to the 53 degree Feitian Maotai liquor known as "Pufei", the zodiac liquor, aged Maotai liquor, commemorative liquor and boutique Maotai liquor are all Maotai liquor with "increased price". However, in addition to Pufei's market supply and demand in the first half of this year, the market of aged Maotai and zodiac Maotai liquor is not so tight.

It is worth mentioning that the revenue of Maotai liquor series, which is described as two wheel drive, did not increase in the first half of this year. According to the semi annual report, the sales revenue of series liquor was 4.65 billion yuan, which was the same as that in the first half of last year. According to the sales net interest rate of 28% last year, the contribution of Maotai series liquor to the company's profit is far less than that of Maotai liquor.

Export has become one of the highlights of Maotai's performance growth in the first half of this year. According to the 21st century economic report, 1.1 billion yuan of liquor revenue came from overseas markets, exceeding 1.08 billion yuan of Maotai's export volume last year.

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