Rebuild A Gujinggong

Over the past few years, the extensive development brought about by the merger and acquisition of Huanghelou wine industry has not brought about the faster growth rate than expected. Gujinggong liquor (000596. SZ), one of the eight famous liquor producers, has chosen the road of capacity expansion based on Anhui headquarters.

On July 20, Gujing gongjiu issued a report on the issuance of non-public A shares and the listing announcement. The report disclosed that Gujing gongjiu issued shares to no more than 35 (including 35) specific objects by means of non-public issuance. The issuing objects were finally determined to be 13 professional investors such as e fund, Huatai Securities and China Merchants Fund. The issuing price was 200 yuan / share, the number of shares issued was 25 million shares, and the total amount of funds raised was 5 billion yuan, It is used in the intelligent technology transformation project of wine production.

It is not so much a reconstruction project as a reconstruction of an ancient well tribute wine. The project, with an estimated total investment of 8.9 billion yuan, is located in Bozhou City, Anhui Province, located in the west of zhangjinan Gujing Ecological Industrial Park, Gujing Town, with a total area of 1830 mu.

Let's look at capacity first. The report said that after the completion of the project, the annual output of 66600 tons of raw liquor, 280000 tons of base liquor storage and 130000 tons of finished product filling capacity will be formed. According to the annual report of Gujing gongjiu in 2020, the actual production capacity of the company is 83000 tons and the design capacity is 115000 tons. Once the new project is completed, the new design capacity will be more than double the existing design capacity.

Look at the revenue. Last year, the revenue of Gujing tribute wine was about 10.3 billion yuan. According to the publicly disclosed information, after reaching 80% of the production capacity by 2025, the project will sell 100000 tons of finished liquor in exchange for 12 billion yuan of sales revenue; By 2026 to 2035, the output will reach 100%, and the sales revenue of 130000 tons of finished liquor will reach 15 billion yuan.

Once the wish is fulfilled, the revenue of Gujing tribute liquor will double on the existing basis and enter the liquor listed company with a sales scale of 20 billion yuan. The average annual net profit of the new project will also increase by 1 billion yuan on the existing basis.

How to digest the new liquor production capacity more than double? Gujing gongjiu once responded to the SFC's questions in March this year. However, the fierce competition of the secondary high-end liquor is always changing.

Performance commitment of Huanghelou liquor industry extended for one year

Gujing tribute wine is one of the eight famous liquor in China. In 1984 and 1989, Huanghelou liquor industry was selected as "China's famous liquor" at two national liquor evaluation conferences.

As early as April 25, 2016, gujinggong liquor signed a strategic cooperation agreement with Huanghelou liquor industry. Four days later, Gujing gongjiu's purchase of assets was announced. According to the agreement, the company purchased 36% of the equity of Huanghelou liquor held by Wuhan Tianlong Investment Group Co., Ltd. and 15% of the equity of Huanghelou liquor held by natural person Yan Hongye for 816 million yuan.

At that time, gujinggongjiu had not yet broken through the revenue barrier of 10 billion yuan.

According to the 2015 annual report, as the leader of Anhui liquor industry, the main market of gujinggong liquor is Anhui. At that time, the central China market, mainly Anhui and Henan, accounted for 85% of the total revenue of more than 5 billion yuan. After the completion of the acquisition, Gujing gongjiu mainly competed with Jinjiu, Baiyunbian, Daohuaxiang and Zhijiang in Hubei market.

According to gujinggong's commitment to Huanghelou liquor industry, from 2017 to 2020, the business income (including tax) of Huanghelou liquor industry will reach 800 million yuan, 1.3 billion yuan, 1.7 billion yuan and 2 billion yuan. Meanwhile, within five years after the delivery date (excluding the year in which the target equity delivery date is located), the annual net sales interest rate (actual net profit / operating income) of Huanghelou liquor industry is no less than 11%. If the annual sales net interest rate of Huanghelou liquor industry is lower than 11%, Gujing tribute wine shall be compensated for the difference according to the agreement; If the sales net interest rate is lower than 11% for two consecutive years, the transferor has the right to buy back all the shares of Huanghelou liquor held by Gujing gongjiu, with the buyback price of 816 million yuan.

According to the annual report, from 2017 to 2020, the operating revenue of Gujing gongjiu was 7 billion yuan, 8.7 billion yuan, 10.4 billion yuan, and 10.3 billion yuan, respectively. The revenue of Huanghelou liquor industry decreased significantly from 800 million yuan, 1 billion yuan and 1.3 billion yuan to 580 million yuan.

Last year, Huanghelou liquor industry, located in Hubei Province, was greatly affected by the epidemic, and its business income shrank sharply. After Gujing gongjiu held the shares, it lost money for the first time, with a net profit of - 11 million yuan. After negotiation between the two parties, Gujing gongjiu did not make performance compensation, and ignored last year. The original performance commitment was postponed to 2021 as the fourth assessment year, and the revenue target was postponed.

Although last year was quite special, from the perspective of the first three years of cooperation, the performance of Huanghelou brand, which was dispatched to the competent generals, did not exceed the expected growth, and did not make a significant contribution to the 10 billion revenue of Gujing gongjiu.

Liang Jinhui, chairman of the board of Gujing gongjiu, once explained that the brand should be the first consideration for merger and acquisition, and then whether there is a market as the basis. The acquisition of famous liquor factories is conducive to the operation of Gujing tribute liquor.

However, after the operation of the double brands, the liquor consulting agency co founded the prospect Business School experts said that Huanghelou liquor industry's short-term scale promotion of Gujing tribute liquor was actually limited. There are many Liquor Enterprises above the designated scale in Anhui Province, and the regional competition pressure is great, and the market support cost is large. Huijiu wants to achieve the strategic goal of national expansion, but it does not have the advantages of Sichuan wine producing areas and original liquor as the basis. It has to shift to brand expansion. With the famous brand of Huanghelou liquor industry, Huijiu is just an attempt to jump out of the strange circle of resource expansion.

How to digest the new capacity

As early as 2016, Gujing gongjiu proposed to comprehensively open the "double 10 billion, double brand" rejuvenation project, with the short-term goal of "winning 10 billion yuan" and the medium-term strategic goal of "returning to the top three and reappearing nationwide". Its brand goal is to become one of the leading secondary high-end liquor brands in China in the next 3-5 years.

In 2019, Gujing gongjiu will enter the 10 billion revenue club. However, last year, the sudden outbreak of the epidemic made Gujing tribute liquor not to advance or to retreat, with revenue of 10.3 billion yuan, a year-on-year decrease of 1%, and a net profit of 1.85 billion yuan, a year-on-year decrease of 11%. The Yellow Crane Tower wine industry in the deep epidemic area is even worse, and the goal of 10 billion yuan has become a prospect. Therefore, relying on its own brand, Gujing tribute wine has become the first choice in the post-10 billion era.

In March last year, Gujing gongjiu put forward the feasibility study scheme of intelligent transformation. In the second half of the year, the plan was approved by the local state-owned assets department, and was examined and approved by the CSRC in April this year. The 21st century economic report reporter can see from the additional issue report that the number of non-public shares issued this time does not exceed 10% of the total share capital before the issuance. Gujing Group holds 48.99% of the shares of Gujing gongjiu, which is still the controlling shareholder of the company. Bozhou SASAC is the actual controller of Gujing gongjiu.

The raised funds of 5 billion yuan will be used for the intelligent technology transformation project of liquor production, and the construction of intelligent and digital koji making workshop, brewing workshop, wine storage room, filling workshop and supporting production facilities, etc., together with the construction of administration, greening, sidewalk and canteen, it is like rebuilding a Gujing tribute wine.

But last year, the production and sales of gujinggong liquor decreased year on year. How will the new capacity more than double?

The annual report shows that last year, the output of Gujing tribute liquor was 83000 tons, down 10% year on year, and the sales of liquor were 87000 tons, down nearly 4% year on year. Even the production capacity of 40 thousand tons of raw pulp in the main product year decreased by 10%, but the sales volume of the product increased by 4%.

In response to this, Gujing gongjiu, when submitting the application documents for additional issuance and replying to the feedback from the CSRC, said that from the industry point of view, the structural prosperity of the liquor industry has continued for a long period, famous liquor enterprises have expanded and increased production, and strategic layout of medium and high-end markets. After the deep adjustment and reshuffle period, driven by the wave of consumption upgrading and the effect of high-end well-known liquor, high-end and secondary high-end liquor with brand power recovered first, the demand of medium and high-end liquor market increased continuously, the proportion of high-end and secondary high-end product income of famous liquor enterprises continued to rise, and the profitability was enhanced.

From the perspective of the enterprise itself, based on the compound annual sales growth rate of Gujing gongjiu liquor products in the future of about 12%, it is estimated that the production capacity utilization rate of the finished liquor this year will be close to 100%. Last year, the company's capacity utilization rate was 72%.

Therefore, Gujing gongjiu proposes to plan ahead of schedule. It is estimated that the average annual sales volume of finished liquor will be 226500 tons within five years after the project is put into operation (2025-2029), and the overall production capacity (11.5 + 13 = 245000 tons) will continue to serve in the whole benefit prediction period (to 2035), and there is no significant difference between the future overall production capacity and the expected sales volume, It can provide support in terms of production capacity for the company's further strategic development in the future.

From 2017 to 2019, Gujing gongjiu maintained a compound growth rate of 21% in the traditional advantageous regions of central China (mainly Anhui Province), and the compound growth rate of overall liquor business scale reached 22%.

The constant premium of famous liquor brands is also regarded as an important driving force for the digestion of production capacity. Gujinggong liquor said that the production capacity of the project will be used in the production of high-end and secondary high-end products.

However, industry insiders believe that the secondary high-end price band is fiercely competitive, and famous liquor Luzhou Laojiao, Yanghe shares, Jiannanchun, Shuijingfang, etc. are the strong rivals of Gujing gongjiu for more market share in this price segment. According to the first quarter report of this year, Gujing gongjiu stopped the downward trend of last year's performance, and its revenue and net profit increased by 26% and 28% respectively on a year-on-year basis. However, compared with the first quarter of 2019 before the outbreak of the epidemic, the two indicators increased by 12% and 2.5% respectively year-on-year, and the growth rate was significantly slowed down.

How to win a place in the markets of North China, South China, East China and southwest China, the key to capacity digestion is whether the national strategy of Gujing tribute liquor can be implemented.

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