Fosun Global Partners Talk About The Logic Of Investment In Liquor: On The One Hand, Operation And On The Other Hand, Investment In Liquor

Last year, Fosun international returned with two liquor listed companies in the arms of Yuyuan tourism Mall (Group) Co., Ltd. (hereinafter referred to as Yuyuan shares, 600655. SH).

On March 20, the first 2020 annual report of liquor listed companies disclosed the achievements of Guo Guangchang, chairman of Fosun International: Jinhui liquor (603919. SH) achieved a net profit increase of more than 20% over the same period of last year, reaching 330 million yuan.

One year later, Guo Guangchang made his first appearance at St shede (600702. SH) national distributor conference and became the focus of the national spring sugar and wine fair, which was revived by the epidemic situation. On the last day of last year, it bid for 70% of the equity of Sichuan Tuopai shede Group Co., Ltd., the parent company of St shede. St shede announced its sales performance on April 3 this year: from the Mid Autumn Festival of last year to the Spring Festival of this year, the company's dynamic sales recovered, the social inventory decreased by several hundred million yuan, and the white wine sales exceeded that in 2019 before the epidemic.

Guo Guangchang made a brief speech at the shede dealer conference: shede team must make dealers make money. Stimulated by the good news, the stock price of St shede reached a record high. On April 7, the stock price rose to 98.47 yuan, close to 100 yuan, and the gap with Wuliangye, Yanghe shares, Luzhou Laojiao, gujinggong liquor, Shanxi Fenjiu and Jiugui Liquor began to narrow.

On April 5, Fosun international, together with the person in charge of Fosun Fuyu liquor industry development group and the core executives of Jinhui liquor, met with many institutions in Chengdu, disclosing for the first time the logical framework of Fosun's investment in liquor.

On April 13, Yuyuan Co., Ltd. issued the latest performance pre increase announcement. In the first quarter of this year, together with the earnings of the two liquor listed companies, it is estimated that the company will realize a net profit of 550 million yuan to 580 million yuan, an increase of 69% - 78% year on year.

From strategic equity investment to industrial holding

Guo Guangchang invests in four sectors of Fosun International (00656. HK), namely, health, happiness, affluence and intelligent manufacturing.

Yuyuan Co., Ltd. is the flagship company of Fosun international happy plate, which is the indirect holding subsidiary of the latter. Guo Guangchang is the actual controller of Fosun international and the chairman of the company. Both Jinhui liquor and St shede were invested by Yuyuan group and added to the company's happy plate liquor industry.

Is Fosun international doing investment or industry today?

During the sugar and wine fair, Wu Yifei, global partner of Fosun, executive director of Fosun liquor industry committee and chairman and CEO of Fosun Fuyu liquor industry development group, said that most of Fosun's industries were brought by investment and M & A, and it was also the first to make mixed reform of state-owned enterprises. In fact, Fosun has found that the relationship between investment and industrial operation is inseparable.

Let's start with investment. How to find value? Basically, there are business cycle, company cycle, industry cycle, product cycle and entrepreneur cycle. Investment is to find the superposition of the trough in these five cycles. "You may find a trough, but if other cycles are not at this trough, you may not be able to seize investment opportunities." He said that the core reason for Fosun's rapid growth is that in the process of development, Fosun has constantly grasped the low point of the cycle and found value in the cycle, but it never pursues high or blindly pursues the Internet outlet.

Let's talk about operations. How to endow and improve after investing assets? In fact, when Fosun started its business, it was an industrial operation company. Therefore, Fosun system is difficult to distinguish which is the investment team and which is the investment operation team, especially in the higher position of the post leader. "We require entrepreneurs to have investment vision, and investment teams must have the ability to operate the industry." He said.

Wu Yifei said that since Fosun international wants to be a consumer sector now, pure financial investment is not considered. Of course, Fosun also has a wealth sector, including insurance, financial platforms and a large number of placeable assets, which require financial investment. However, in terms of industrial development, either do platform layout in the track that Fosun has not yet laid out, or merge and hold shares from the level of industrial reinforcement from the layout of track, which is basically based on industrial investment.

From strategic equity investment to industrial holding, Fosun international has changed its course in wine industry investment.

On December 20, 2017, Fosun International announced that Fosun property control, Dingrui reinsurance, fidelidade, Star Insurance and CMI, which are controlled by Fosun international, will purchase 17.99% of the equity of Qingdao beer from Asahi Group Holding Co., Ltd. for a consideration of HK $6.617 billion (about RMB 5.563 billion). After the transaction, Fosun international became the second largest shareholder of Qingdao beer. However, in September, November and December of last year, Fosun's shareholding proportion in Qingpi has been reduced to 10.57% through block trading and centralized bidding.

Different from Qingpi's financial investment, Yuyuan shares acquired 38% of Jinhui liquor's equity with a total of 2.55 billion yuan through agreement transfer and tender offer, becoming its largest shareholder. At the end of last year, Yuyuan shares indirectly controlled St shede with an investment of 4.53 billion yuan. Sichuan Tuopai shede Group Co., Ltd. holds 29.95% equity of St shede.

In fact, the investment in liquor industry is placed in the happy sector, which is directly related to the changes in the income structure of the four major sectors of Fosun international.

According to the public data, in 2016, the income of Fushun International's rich sector accounted for 60%, and that of happy sector accounted for 14%. Last year, there was little change in the share of income from health and manufacturing sectors, but the income of happiness sector has risen to 41%, while that of wealth sector has dropped to 30%.

"The evolution of the structure also shows that Fosun's industrial operation attributes continue to strengthen." Wu Yifei said that behind the industrial operation is the unified strategy of deep understanding of the industry. Fosun should first consider the horizontal layout of the whole ecosystem. For example, Fosun liquor industry plate not only makes liquor, but also does fruit wine, whisky and other categories that meet the consumption characteristics of the population? Secondly, Fosun should lay out upstream and downstream of the industrial chain to enhance its product strength.

Investment logic of liquor

"We want to enhance the value of the wine industry's core assets from the perspective of operations and investors." Wu Yifei said that in the happy sector, Fosun international realizes its dream of industrial development through two wheel drive.

He said that Fosun is more strict in risk control when making investment, and takes the in-depth understanding of the industry and the improvement of industrial operation as the basic starting point.

"We have been focusing on liquor for 20 years. I've been watching liquor for 20 years on the ground. I haven't even touched the wind and rain. I've been staring at the enterprise. So it's time to do it. " Wu Yifei said that after three seconds of decision-making, several billion people went out, behind which was a lot of industrial research. "Why are we willing to go so smoothly? Frankly speaking, we got involved in 2015, and then we missed it." He said.

In his opinion, liquor has a strong ability to raise prices, has high repurchase rate and gross profit rate, good cash flow and no risk in inventory. Liquor listed companies fully enjoy the dividend of market scale increase.

Wu Yifei said that investment in wine industry should be from the perspective of asset management. Has growth been out of business for a long time? Is it off the main track? Should investors consider exit? So as to ensure that the whole asset structure is in a good state. Holding investment must give investors returns, not just industrial vision and feelings. "I hope that in the next three years, Yuyuan shares will not invest in the liquor industry after six limit boards, but 60 trading boards." He said.

In addition to investment, Fosun also hopes to strengthen liquor enterprises through operation.

"We focus on improving the overall operational capability. Whether the operation granularity of the core assets of the liquor industry is refined, whether the evaluation standards and operation efficiency have been improved, and whether the digital operation level has been improved It's not easy for an entrepreneur to pay attention simultaneously. " Wu Yifei said that often a single entity has many resource bottlenecks and barriers. For example, if you want to find a very good intelligent talent, you can't find it in many remote places.

He said that the main task of Fosun's establishment of liquor industry development group is to absorb industry wisdom and play methods like searchlights, provide very good strategic judgment, and command enterprises not to take the wrong path. Fosun will also improve the organizational capacity of liquor listed companies, including the introduction of the whole team, the integration of industrial resources, channels and flows, and the promotion of digital transformation of enterprises to realize flexible production. He believes that liquor competition will be more intense in the next three to five years. Who can use digital precise insight into consumers and manage their own ecological operation is the winner.

According to the reporter of 21st century economic report, after the successful auction of 70% equity of Tuopai shede group on December 31, 2020, Yuyuan shares transferred 4.53 billion yuan to the bank account designated by the court at 11:30 a.m. on January 4, 2021. "Why so fast, we should give people confidence, similar Tianyang occupy liquor listed company funds will never happen again." Wu Yifei said.

After Fosun became the owner of Jinhui liquor and St shede, this year, the relevant person in charge of Jinhui liquor said at the Fosun investor briefing meeting that longnanchun brand would be built into the company's high-end brand. How to realize the nationalization of Jinhui liquor with the minimum cost has become the strategic consideration of Fosun. Wang Weilong, general manager of shede liquor sales company, also said that the company has launched the double brand strategy and increased the investment in "Tuopai" brand. Under the operation idea of Fosun, St shede production affected by Tianyang incident has been fully restored.

"This industry can be expected for a long time in the next five or ten years, and large-scale liquor enterprises are more promising. Fuxing's liquor is not maowu's way of playing. We will certainly go out of our own way." Wu Yifei said.

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