(Report Producer/Author: Minsheng Securities, Wang Yanhai, Li Xiao)
1 Longnan historical wine leader, Fosun entered the main to empower development
1.1 Geographical advantages ensure the quality of liquor, and the historical background gives famous liquor genes
Jinhui wine is produced in the upper reaches of the Yangtze River, in the southern foothills of the Qinling Mountains, adjacent to the World Natural Heritage Jiuzhaigou in Longnan Hui County, Gansu, which is the Huicheng Basin of the Qinba Mountains at the junction of Gansu and Shaanxi Rivers, and the suitable climatic environment has formed a unique microbial strain. Jialing River The water system is located in the upper reaches of the Yangtze River, deeply filtered through vegetation and earth and rock layers, and has an underground weak alkaline mountain spring known as Haishen Spring, the water temperature is constant at 14.5 degrees in all seasons, and the trace elements have stability to ensure the excellent quality of Jinhui wine. According to local records and excavated cultural relics, the golden emblem wine originated in the Western Han Dynasty and flourished in the Tang and Song dynasties, because after the famous Southern Song Dynasty general Wu Jiu won the battle with the Golden Soldiers at Xianrenguan in Huixian County, the generals drank with the golden soldiers' helmets, so they got the name "Golden Helmet Wine", which was later renamed "Golden Emblem Wine" because of the local "helmet" and "emblem" homophony. During the Ming and Qing dynasties, Huixian became a well-known "western wine town", and a large number of well-known liquor workshops such as "Yongshengyuan", "Kuan Yucheng", "Jinshengfang", "Gongxinfu" and so on emerged, and the long historical and cultural accumulation gave Jinhui liquor genes.
The company's history can be traced back to 1951, it was registered on the Shanghai Stock Exchange in 2016, and in 2020, Fosun Group became the controlling shareholder of the company:
Initial stage (1951-2004): In 1951, the predecessor of the company, Huixian Distillery in Gansu Province, was established on the basis of well-known liquor workshops such as "Yongshengyuan" and "Kuan Yucheng", and in the 1960s, the company registered the "Jinhui" trademark, and "Maotai" and "Wuliangye" became one of the first eight national liquor brands approved for registration in China. In 1977, the company developed the "Long Nanchun" brand liquor and changed its name to Gansu Longnanchun Distillery, and in the 1980s, it was renamed Gansu Longnanchun Liquor (Group) Co., Ltd., becoming a wholly state-owned enterprise under the province. In the 1990s, Longjiu Group was in trouble with production and operation, declaring bankruptcy in 2004 and being acquired by Gansu Jinhui the following year.
Innovative development stage (2008-2015): In 2009, Yate Investment Group invested in the establishment of Huixian Jinhui Liquor Co., Ltd. to acquire assets and business related to Gansu Jinhui and liquor operations, focusing on the development of the main business of liquor, and successively launched "special music series", "three years and five years old", "red porcelain special music" and other consumer-loved products, and the product structure was continuously optimized. In 2012, the company's annual sales exceeded one billion yuan, and various indicators maintained a year-on-year growth rate of more than 40% for four consecutive years, sitting firmly in the top position of Gansu liquor enterprises, and the core competitiveness has been improved.
Consolidation and promotion phase (2016 to present): On March 10, 2016, the company officially landed on the Shanghai Stock Exchange to help further enhance brand awareness. In 2017, the company began to exert efforts at the production capacity end, renovated and expanded the cellar mud workshop and the four workshops of winemaking, and put into operation the new koji-making center in 2018. In 2020, Fosun Group entered the company through its Yuyuan Shares Holdings.
1.2 "Century", "Soft" and "Vintage" multi-series to create a multi-level product system
The company's product series is rich, covering high-end, mid-end, low-end all-round price band. The company's product positioning is clear and the product line is rich. The company subdivides products according to the factory price, high-end wine products above 100 yuan / 500mL include "Golden Emblem Year Twenty-Eight Years", "Golden Emblem Year Eighteen Years", "Golden Emblem Old Cellar Series" products, "Soft Golden Emblem Series" products, "Positive Energy Series" products, "Century Golden Emblem Series Five-Star", "Century Golden Emblem Series Four-Star", etc.; 30-100 yuan/500mL Of mid-range wines include "Century Golden Emblem Series Three-Star", "Century Golden Emblem Series Two-Star", "Aging Series Five-Year", "Aging Series Three-Year", " Jinhui touqu, Jinhui Special Qu, etc.; low-end wines below 30 yuan/500mL include "Jinhui Aging".
1.3 Fosun enters the ownership and empowers the new development of the Golden Emblem
Fosun becomes the controlling shareholder and empowers the development of enterprises. On May 27, 2020, Gansu Yate Investment and Yuyuan Co., Ltd. signed the Share Transfer Agreement to transfer 152 million shares of the company's shares held by it at a price of 12.07 yuan per share, accounting for 30% of the company's total share capital, and complete the share transfer on August 3. On September 6, Hainan Yuzhu intends to acquire 8.00% of the company's total share capital, and the offer price is 17.62 yuan per share. At present, Fosun's Yuyuan shares and Hainan Yuzhu hold a total of 193 million shares in the company, accounting for 38% of the company's total share capital, Guo Guangchang has become the actual controlling person of the company, and the shares of Yate Investment have dropped to 13.57%, becoming the second largest shareholder of the company.
Fosun Group has rich experience in the operation of the food and beverage industry and extensive channel resources in East China, and the company has reached cooperation with Nanjing Iron and Steel, Wanbang Pharmaceutical and Forte Group with the help of shareholder resources. Through the development of customization for enterprises within the group, grafting group purchase resources, and carrying out activities such as "famous wine into famous enterprises", we will open up blank markets, promote the expansion of the company's marketing network, enhance brand power construction, and improve brand awareness. (Source: Future Think Tank)
2 Based on Gansu, the northwest of the force, looking at east China
Regional strategy: with Gansu as the center, the provincial layout, the five northwestern provinces as the second growth pole, and East China to achieve a breakthrough of "zero".
In terms of regions, the company's revenue mainly comes from the southeast of Gansu and the surrounding areas of Lanzhou in the province, and the proportion of income outside the province continues to rise. In 2020, the company's revenue in Gansu Province accounted for 81.84%, of which revenue from southeastErn Gansu accounted for 33.07%, revenue from lanzhou accounted for 27.30%, revenue from central and western Gansu accounted for a total of 21.48%, and revenue from other provinces accounted for 18.16%. The company continues to consolidate the core market in the province, while constantly developing the northwest, East China and other markets outside the province, the marketing network radiates Gansu, Shaanxi, Ningxia, Xinjiang, Tibet, Inner Mongolia and other places. After Fosun became the owner, the company actively used its brand potential and channel advantages in East China to penetrate the East China market and achieve a breakthrough of "zero".
2.1 The regional leader position is stable, and the focus is on the layout of the province
2.1.1 The liquor market in the province has limited capacity and a stable competitive pattern
The core elements affecting the regional liquor market capacity include the economic foundation, population size and customs, of which the economic basis determines the price and grade of liquor consumption, and the population size and customs affect the amount of liquor consumption. Gansu Province is located in the northwest of the mainland, sparsely populated, the economic foundation is relatively weak, and the per capita disposable income of Gansu Province in 2020 will be the lowest level among all provinces in the country. Due to the relative backwardness of economic development, the degree of development of the liquor market in Gansu is relatively limited, the main consumer price band of liquor in Gansu is concentrated below 100 yuan, and the mainstream consumption level of lanzhou, the provincial capital, is relatively high, concentrated in products above 100 yuan.
Due to the population restrictions of Gansu, the liquor market capacity in the province remained stable. Gansu is not a major province in the production and marketing of liquor, and the output of liquor in the province in 218 years was 29,500 kiloliters, which was at a low level in the country compared with other provinces. In 2020, the permanent population of Gansu Province is 25.01 million people, from the geographical point of view, Gansu is narrow and long from east to west, the central and eastern regions have more population distribution, the density is higher, is the main consumption area of liquor in Gansu Province, the Hexi region is sparsely populated, and there are regional liquor enterprises in various regions, and the consumption is mainly real estate liquor. Limited by the level of regional economic development, the total demand capacity of the liquor market in the province is relatively small, about 6-7 billion yuan.
Local brands dominate the Gansu liquor market, and the regional leading advantage is obvious. Due to the low total scale of the liquor market in Gansu Province, the grade of liquor consumption is lower than the national average, and the penetration rate of pseudonymous liquor in the country is low, it has not yet been focused on layout, and local brands dominate the Liquor market in Gansu with local advantages and high cost performance. At present, the liquor market in Gansu is showing a competitive pattern of "one super and many strong": the leading golden emblem wine of one super has a significant advantage, and local liquor enterprises such as Hongchuan, Binhe, and Hanwu are also more popular in the province. In 2020, the operating income of Jinhui Liquor was about 1.73 billion yuan, accounting for the largest market share in the province, reaching 24%, the revenue of Hongchuan Liquor Industry exceeded 800 million yuan, the market share was about 14%, and the riverside income was about 500 million yuan.
Geographical characteristics create a high number of high, fragrant preferences, consumers are highly dependent on local products. Gansu is located in the northwest, the folk customs are simple and hospitable, and the local people's liquor consumption habits are concentrated in the high degree of aromatic products. Due to climate and technological reasons, Gansu real estate wine taste is dignified and unique, the aftertaste is bitter, consumers have a certain dependence on local products, and the market share of real estate wine in the gansu provincial market reaches more than 60%. The main brands in the province are Jinhui Liquor, Binhe, HanwuYu, Hongchuan, Kuntong, Huangtai, Liangdu Laojiao, etc.; the brands outside the province mainly include Guizhou Maotai, Wuliangye, Yanghe, Langjiu, Fenjiu and other national brands with strong brand power and strong reputation of liquor brands in this layout.
Local brands compete with brands outside the province in misalignment on the price band. Due to the limited overall economic development level of Gansu Province, the overall consumption level of liquor is mainly mid-range wine, the mainstream price band in the rural market is at a price of 50-100 yuan, the mass consumption is concentrated in 100-200 yuan, the provincial capital Lanzhou banquet market leads the consumption upgrade, at a price of 200-300 yuan, and the mainstream price band will climb to 100-300 yuan in the future:
(1) High-grade wine: Jinhui 28 years and Binhe Jiuliangye 20 years in the price band of more than 500 yuan compared with the existence of famous wines outside the province in the inferiority, Gansu Province's market performance includes Wuliangye, Maotai, Guojiao 1573, etc.; 300-500 yuan price with local brand products including Jinhui 18 years, Binhe Jiuliangye, Hanwu Liquan 18 years, etc., outside the province brand Jiannanchun, Yanghe and other obvious advantages. The price of local high-end wine products is more concentrated in the price range of 100-300 yuan, including Jinhui Wine Century, Soft, Positive Energy Series, Binhe Jiuliang Spring, Hongchuan Five Star and so on. Langjiu and Laobaifen wine, which are products outside the province, also occupy part of the market.
(2) Medium and low-grade wine: Gansu Province's real estate wine is still mainly concentrated in low-end wines, such as Century Golden Emblem Three-star, Two-Star, Golden Emblem Aging, Hanwu Royal Four-Star, Binhe Rant Liquid, etc., and foreign brand competitors include Laolang Wine, Yanghe Daqu, Mianzhu Daqu, Xifeng Daqu, Niulan Mountain, Red Star Erguotou, etc.
2.1.2 Exert force on Longnan Lanzhou and seize Pingqing in Hexi
The company's revenue contribution in the province mainly comes from southeastErn Gansu and lanzhou surrounding places: based on the compound growth rate of the local market in the past three years and the growth rate in the first three quarters of 2021, combined with the market share of companies in different regions, under the neutral assumption, we estimate that the company's southeastern Gansu, Lanzhou and surrounding areas, western Gansu and Longdong regions will grow at a compound growth rate of about 8%, 25%, 35% and 20% in the next three years.
1) Southeast Gansu, as the birthplace of the company, the company has been deeply engaged for many years. The three cities in the southeast region accounted for 14.7% of the GDP in the province, the population accounted for 24.3%, and the company's market share exceeded half, and the leading advantage was prominent. In 2020, due to the epidemic, the revenue of the southeast region of Gansu was 570 million yuan, accounting for 33.1% of the total revenue, which was slightly lower than that of 2016-2019, but it is still the company's core market.
2) The provincial capital Lanzhou and the surrounding areas of the market as the commanding heights of consumption in Gansu Province, has a leading role in the province's liquor consumption, the competition is relatively fierce, is the national famous wine into Gansu must compete for the place, but also the company's key breakthrough in the provincial market. In 2020, Lanzhou and its surrounding areas generated revenue of 470 million yuan, accounting for 27.3% of revenue, making it the company's second largest revenue contribution area. The provincial capital city is of great significance to real estate wine, Lanzhou's GDP accounts for nearly 1/3 of Gansu Province, the white wine market capacity reaches about 2.2 billion yuan, and the consumer price of liquor leads the province. The company in Lanzhou and the surrounding market to cultivate high-end products in the vintage series, the current market share of about 20%, while investing a lot of resources to cultivate government affairs, business customers, further promote product structure upgrading, in the province to form a leading role, the scale of income to increase the space is larger.
Deeply develop Longxi and Longdong (Pingqing area) to grasp the market incremental space:
1) The western part of Gansu mainly corresponds to the Hexi region, which is composed of Jiuquan, Jiayuguan, Zhangye, Jinchang and Wuwei. In 2020, the total GDP of Hexi region accounted for 25.2% of the province, which is the second largest economy in Gansu, and the per capita consumption of liquor is relatively high, compared with its market share of about 10%, which has a large room for growth. The wine culture in Hexi is prosperous, and the squeeze competition in the real estate wine market is fierce. In recent years, some small wineries in Hexi County have gradually shrunk, bringing opportunities for the company to occupy market share. The company's revenue growth rate in western Gansu far exceeds that of other regions in the province, reaching 30% in 2020, which is the strategic key market for the company's market share increase in the province, and the current market share is still low.
2) Due to the complex landform and the terrain deep into the junction of Ningxia and Shaanxi, the Longdong area is a weak area for the company's layout, but the economic development foundation is good. With the acceleration of the company's expansion in the northwest region, the base of Longdong region is small, which is of great significance to the strategy of improving the market penetration rate of Shaanxi and Ningxia.
2.2 Adhere to the northwest strategy and accelerate the expansion of the market
2.2.1 Consumption barriers help expansion, and the competitive landscape develops steadily
Outside the province, the main attack on the northwest region, customs and habits to help expand. Gansu borders the remaining five provinces in the northwest region of the mainland, including Qinghai, Xinjiang, Inner Mongolia, Shaanxi and Ningxia, where the folk customs and consumption habits are more similar, and the company is more likely to open the northwest market. The climate in the northwest is harsh, the winter is long, the folk customs are simple and bold, the drinking atmosphere is strong, there are barriers to consumer preference, and the real estate wine companies are rooted in the local market, the brand trust is high, and the market is relatively closed.
Economic development opens up the consumption space, and geographical advantages accelerate the sinking of channels. In recent years, the per capita disposable income of the other five provinces in the northwest has increased steadily and is higher than that of Gansu Province, and the company has a large space for expansion and development in the northwest market. The northwest region is sparsely populated, the transportation cost of products is high, and the sinking of channels is difficult. As the first wine in Gansu, Jinhui wine has a high degree of fame and reputation in the entire great northwest region, and by taking advantage of its location to build a sales network covering surrounding provinces and cities, it is easier to open the northwest market than other national brands.
The differentiated competition pattern of the northwest liquor market is obvious, and the growth rate of Jinhui liquor in the Shaanxi and Ningxia markets is relatively fast. In the northwest region, there are fewer liquor leaders with high popularity and large scale, and the main brands include Xifeng wine, Elite, Tianyoude wine, and Jinhui wine, and the degree of product and market overlap between the brands is significantly different. Xifeng wine has obvious advantages in the Shaanxi market, with revenue of 6.3 billion yuan in 2020 and a market share of more than 50% in Shaanxi Province; Yilite is the leader in the Xinjiang market region, with a revenue of 2.302 billion yuan in 2020, of which xinjiang revenue accounts for more than 67%; Jinhui wine began to exceed Tianyoude wine in 2017, and the revenue growth rate of other brands in recent years is faster than that of other brands.
2.2.2 Product + regional two-line strategy, according to local conditions to open up a blank market
Product strategy: the main promotion of the positive energy of the golden emblem, and the differentiation of products in the province. The company has carried out a double upgrade of quality and packaging of energy series products, added 13 grain selection standards, adopted green packaging that symbolizes vitality and self-motivation, and the product positioning is in line with the personality and exquisite pursuit of high-end elites, focusing on 100-300 yuan consumption upgrade price, supplemented by sub-high-end price vintage series, light bottle wine series, etc.
Marketing strategy: one city, one policy, intensive cultivation to expand the market. The company's market outside the province grew rapidly, and the proportion of shares outside the province increased in the third quarter of 2021, reaching 23.08%, and the revenue growth rate outside the province in 2016-2020 was relatively fast, with a CAGR of 28.4%. The company adopts the intensive farming mode of "one city, one policy" in the market outside the province, with clear strategic planning and rapid growth as a whole. At present, the company has completed the preliminary layout in five major markets outside the province:
(1) Ningxia market: From 2014 to 2015, due to geographical and demographic advantages, the company developed the first stop outside the province for the Ningxia market, mainly promoting energy series products. Ningxia borders Gansu, because the traditional culture of ethnic minorities Hui does not drink alcohol, there is no strong local real estate wine brand, consumers are not excluded from foreign wine, reducing the threshold for market access.
(2) Shaanxi Market: Adopting the playing style from rural layout to urban area, in 2016, the company laid out the Baoji Market bordering Gansu. In 2017, the company began to develop from the Baoji market to the Xi'an market and the entire Shaanxi provincial market, mainly promoting energy series products. The company takes consumers as the core and cultivates the Baoji market intensively. Starting from 2021, we have made a year series in the Shaanxi market (18 years of Jinhui, 28 years of products outside the province of Jinhui), and we plan to set up a subdivision division to operate large customers in the Shaanxi market in the future.
(3) Inner Mongolia market: At the end of 2018, the company began to focus on the development of the Inner Mongolia market, and has completed the market layout of the five cities and achieved good results. In the future, we will expand the layout of the Inner Mongolia region in the form of dots and areas, focus on strengthening brand influence, and strive to occupy an important position in the local market.
(4) Xinjiang market: It is still in the initial state of penetration, and mainly promotes positive energy series products and light bottle wine products for the Xinjiang market.
(5) Qinghai Market: Adjust the investment strategy for the market, cooperate with local resource-rich large merchants, and launch the product Jinhui Shanshuiyun for the Qinghai market in 2020.
2.3 Fosun resources to empower east China expansion
The company actively adjusts its development strategy and relies on Fosun resources to expand the market in East China. Under the addition of Fosun's ecosystem, in October 2021, the company set up sales branches in Jiangsu and Shanghai in East China, focusing on the recruitment of marketing teams, product research and development, and organizational structure design. At present, the East China market is mainly based on group buying, and the company launches customized products for large customers. Customized liquor has flexibility, it is difficult to achieve large-scale effect production, the company has a small volume in the East China market, and customized terminal channel products have advantages. At present, the company designs and produces customized products for Nanjing Iron and Steel, Wanbang Pharmaceutical, Forte Group, etc. in the Fosun ecosystem.
Targeted development of the Golden Emblem Old Cellar series, "Long Nanchun" as a reserve brand. At the beginning of 2021, the company began to lay out the channel market in East China, tailor-made the old cellar series products with a price band of 200-600 yuan for east China, which are divided into six kinds of high and low liquor of Jinhui old cellar 90/120/180. In 1992, Long Nanchun won the gold medal of the International Wine Exhibition in Bangkok, Thailand and the gold medal of the International Famous Wine Exhibition in Paris, France, with a certain brand awareness, and has the potential for future development as a reserve brand of the company. (Source: Future Think Tank)
3 Long-standing brand excellent quality, product structure continues to upgrade
3.1 Historical precipitation quality, technological upgrading process
The company has six original ecological production process advantages, with a unique style of strong aroma and elegant type, its taste characteristics are "cellar aroma rich, sweet and round, fragrant harmony, fragrant long taste net", unique geographical location and brewing process make Jinhui wine both full and mellow of the southern wine and the fragrance of the northern wine pure, the product has the unique physical attribute of "only cellar aroma, no mud taste". Jinhui Ecological Winery Garden has a superior ecological environment, rich and diverse plant species, and has a unique winemaking biome, and winemaking uses natural deep circulation mountain spring water from the underground in the upper reaches of the Yangtze River. The Huicheng Basin where the company is located has tens of thousands of acres of special grain base for winemaking, through low temperature cellaring and low temperature fermentation, using a thousand-year-old cultural relics level national locust wine cabinet to store Jinhui original wine, to ensure that Jinhui wine taste sweet and clean and thick historical and cultural accumulation. Since its listing, the company has actively expanded its production capacity, and by the end of 2020, it has stocked about 37,000 kiloliters of base wine, providing a guarantee for product quality.
Driven by the dual brand strategy, high-quality wines have won many awards. The company has the Golden Emblem + Longnan Chun double brand drive, the current main Jinhui wine series won the gold medal in the 2018 Brussels International Spirits Competition, and has won the "IWSC Spirits Gold Award", "China Wine Industry Best Product Innovation Award" and other honors. Long Nanchun is a famous wine with a long history, and has won awards such as "Gold Medal of International Famous Wine Exhibition in Bangkok, Thailand" and "Gold Award of Famous Wine Exhibition in Paris, France". After 2010, the company will develop the Golden Emblem Wine in an all-round way, and hide the Longnanchun brand, and in the future, the company plans to reactivate the Longnanchun brand and actively lay out high-end and sub-high-end fields.
3.2 The product matrix is clear, and the business department independently promotes structural upgrading
The company's products cover high, medium and low-grade full price bands, and the product matrix is perfect. According to the liquor market structure of the sales area and the purchasing power of consumers, the company covers three price bands of high-end (more than 100 yuan / 500ml), mid-range (30-100 yuan / 500ml), low-grade (less than 30 yuan / 500ml), and the product lines are clear to meet the consumer needs of different levels. At present, the Century Golden Emblem series accounts for about 40% of the company's total revenue, including core products such as Samsung and four stars, which are upgraded from two-star and three-star products below 100 yuan to 100-300 yuan with four-star and five-star products. The Golden Emblem Soft Series is created for the company for business consumption, and the growth is expected to accelerate with the upgrading of consumption and economic development in the province. The Golden Emblem Year series is the company's brand positioning products, occupying the sub-high-end price for 18 years, with the strengthening of the company's brand marketing, the growth rate is relatively fast, and the share is constantly increasing. Positive energy series needle sales to the region outside the province, due to the acceleration of the company's regional expansion, maintain a good development trend.
The product structure continued to rise, and the "connotative growth" accelerated. Since 2015, the proportion of the company's high-end liquor in revenue has continued to rise, and in 2020, benefiting from the upgrading of consumption structure and efficiency improvement, the company's high-end liquor revenue accounted for 50.1%, mid-range liquor revenue accounted for 46.8%, and the revenue contribution of high-end liquor exceeded that of medium and low-end products for the first time. The gross profit margin level of high-end wine is the highest, stable at about 70%, and the gross profit margin of mid-range wine has been declining since 2017, reaching 56.5% in 2020.
Consumption upgrading continues to advance, and the product structure continues to be optimized. The mainstream price band of liquor consumption in Gansu Province has been upgraded from less than 100 yuan to 100-300 yuan, and the company has adopted the strategy of increasing the quality of old products and launching new products at the same time. The sales volume of high-grade wine has increased steadily, and the sales volume of medium and low-grade wine has been continuously reduced with the company's active optimization of SKUs, driving the company's tonnage price to increase, the company's sales volume in 2016-2020 is stable at 15,000 tons -17,000 tons, and the ton price has increased from 75,600 yuan / ton in 2016 to 112,100 yuan / ton in 2020, and the four-year CAGR has reached 10.35%.
The Vintage Series and Soft Series divisions operate independently and have a clear sales organizational structure, which helps to cultivate and increase the market of sub-high-end priced products. 1) Year series: It is estimated that the current revenue accounts for about 15%, and the company carries out in-depth distribution + large customer operations, establishes a high-end brand image at the publicity level, and drives the development of the overall series of brands. In July 2021, the company carried out internal structural changes, the vintage wine series business set up a vintage wine division, the future company investment will be inclined to the vintage series, is expected to maintain rapid growth in the future. 2) Soft Gold Emblem Series: Estimated that the current revenue accounts for about 30%, Soft Gold Emblem series of three products for business banquets to create, through the establishment of independent business unit operations, the price band is positioned at 100 ~ 300 yuan, based on the current consumption upgrade price in Gansu, the future is expected to lead the company's growth.
4 The sword refers to 3 billion, and the incentive mechanism is improved to stimulate the vitality of enterprises
4.1 Equity incentive: enhance the cohesion of the company and mobilize the enthusiasm of employees
Executives, key employees and dealers jointly participate in the stock ownership plan, which is conducive to the stability and vitality of the team. (1) Company executives Shareholding: The company's core management team indirectly holds the company's shares through Zhonghui Investment (5.73%), Qianhui Investment (3.15%) and Yiming Investment (3.15%); (2) Backbone employee shareholding: In May 2019, the first phase of the employee stock ownership plan invested 69 million yuan to subscribe for 4.92 million shares of non-public shares, accounting for 1.26% of the company's total share capital. The plan lasts for 48 months, locked for 36 months, (3) dealer shareholding: In May 2019, the company's dealers indirectly held 1.88% of the shares through the Hualong Securities-Jinhui Positive Energy No. 1 collective asset management plan platform. By fully binding the interests of management, core employees and dealers, the company has improved its corporate governance structure and established a sound long-term incentive mechanism to provide a guarantee for the company's long-term development.
The five-year performance reward and punishment agreement was issued, highlighting the company's determination to develop its business. In August 2019, the Company signed the "Agreement between the Company and the Core Management Team on Performance Objectives and Reward and Punishment Plans" with 9 core management team members, and formulated the five-year operating performance targets and remuneration rewards and penalties for 2019-2023, requiring the annual operating income of each period to be 1.62 billion yuan, 1.83 billion yuan, 2.1 billion yuan, 2.5 billion yuan and 3 billion yuan, with a CAGR of more than 15%; the target non-attributable net profit was 280 million yuan, 320 million yuan, 380 million yuan and 4.7 yuan respectively 100 million yuan and 600 million yuan, CAGR of more than 19%.
4.2 Marketing model: "in-depth distribution + large customer operation", the collection of channel resources
In Gansu Province, in-depth distribution is implemented, and the golden network project builds channel barriers. In 2009, the company began to implement the "Thousand Stores Network" project, through the establishment of a terminal database, all stores are graded, focusing on the core high-quality terminals to increase marketing resources and manpower investment. The introduction of the "Thousand Networks Project" enables the company to control the high-quality distribution system, distribution system and terminal network in Gansu Province, and forms a channel barrier for foreign brands. In 2013, the company upgraded the "Thousand Stores Network" marketing system to the "Golden Net Project", promoting the flattening of channels and sinking the marketing focus to the terminal; at the same time, for the terminal stores with better sales of high-end products and group purchase resources, the corresponding sales and display rewards are given on the premise of sales volume or vivid display, and the sales enthusiasm of terminal stores is mobilized. By actively promoting the "in-depth distribution" of various sales initiatives, the company's sales network has radiated to all counties and districts in Gansu Province.
Channels outside Gansu Province are adapted to local conditions and create models to exert channel power. The company develops channels from other provinces according to the operation mode of "one place, one policy", designs marketing strategies and ideas according to local conditions according to local competitors, channels, consumption methods, etc., and carries out the establishment of channel models. Since 2013, the company has adopted the intensive cultivation of the Shaanxi model market, through the priority layout of Hanzhong, Baoji, Xi'an and other markets, and replicated the experience in other prefecture-level cities to expand on a rolling basis. At the same time, the company aims to make Shaanxi deep and thorough, to build a model market outside the province, and to use Shaanxi as a reference to force the channels of the remaining provinces. The company implements the traditional in-depth distribution model of investment promotion by product for Shaanxi, Ningxia, Xinjiang and other places, while the cooperation mode of establishing a joint venture company is adopted in areas with weak channels such as Qinghai. At the same time, the company recruits high-quality large distributors in various places, develops personalized products, and actively uses channel power to open up blank markets. Using the "core stores" of key investment, asymmetric competition is achieved through "focusing on resources, precision marketing, and doing asymmetry".
Established the key customer operation department to transform to the two-wheel drive of "deep distribution + large customer operation". In view of the trend of consumption upgrading in the liquor industry, the company adjusted to focus on the strategy of high-end products. In the second half of 2020, the company set up a key customer operation department, actively cultivated opinion leaders and consumer consultants, drove high-end product sales through scene marketing and terminal customer sentiment maintenance, integrated the company's resources to empower sales, and actively cultivated terminal markets and consumers. In addition, the company actively exerted efforts to build the "Internet +" channel, built the official point mall of Jinhui Wine, opened official flagship stores such as Tmall, JD.com, Jiuxian Network, pinduoduo, etc., accelerated brand promotion, displayed product image and broadened sales channels, which had a positive effect on the company's expansion of the market outside the province.
4.3 Product publicity marketing: Product publicity is clearly positioned and focuses on consumer interaction
In-depth publicity of "golden emblem wine positive energy", attach importance to advertising and marketing to expand popularity. The company strives to create a grounded "famous wine", strengthen the brand image of its own famous wine, and "brand expression" emphasizes consumer thinking. In recent years, the expense rate has been increasing, and the combination of aerial advertising and media publicity has been adopted in terms of product publicity to accurately cover different groups. The company makes full use of the traffic network to place targeted advertisements on traffic road network billboards, airport waiting screens, high-speed trains, etc., covering high-end business people and enhancing brand image; Through traditional television and new media, we accurately cover middle-aged and young people. In addition, the company has organized interactive activities such as high-end tasting sessions, ecological tours, and positive energy public welfare foundations for many times to expound the image of positive energy and cultivate a sense of brand identity
Cooperate with Huawei to build information terminals and promote digital management with precision marketing. In 2019, the company launched a new "Ten Thousand Merchants Alliance" system, using two-dimensional code points and other information means to improve the alliance system and enhance consumer stickiness. In September 2019, the company signed a service agreement with Huawei, which will provide the company with an informatization construction plan for the next five years in terms of technical architecture, data architecture, application architecture, and business architecture, improve the company's management efficiency through informatization and intelligence, and build a big data analysis framework to further enrich the precision marketing strategy.
5 Financial analysis: the financial situation is stable and the profitability is stable
The company's performance has grown steadily, and the optimization of product structure has driven the gross profit margin to increase. From 2011 to 2020, the company's overall operating income increased from 686 million yuan to 1.731 billion yuan, and the 9-year CAGR reached 10.83%, which was a faster growth rate. The company's revenue grew rapidly from 2011 to 2013; from 2013 to 2014, due to the restriction of the "three public consumption" income growth rate declined sharply; from 2015 to 2016, it gradually recovered; and the company's revenue showed an accelerated growth trend since 2017. The company's net profit attributable to the mother increased from 85 million yuan in 2011 to 331 million yuan in 2020, and its performance continued to develop well. The proportion of the company's high-end liquor revenue increased significantly from 25.6% in 2016 to 50.9% in 2020, and the product structure continued to upgrade. From 2016 to 2020, the gross profit margin steadily increased from 61% to 63%, reaching 66.17% in the third quarter of 2021. The company continues to exert efforts to deploy high-end series products, and the sales volume of high-end wine continues to rise, driving the gross profit margin and net profit margin to increase.
Cost control remained robust and advertising spending increased. The company's sales expense ratio basically remained at the level of 15%, from 13.56% in 2016 to 18.07% in the third quarter of 2021. Among them, transportation costs and business promotion fees have remained basically stable, and the increase comes from advertising expenses and wages and salaries. From the perspective of advertising investment costs, the company has increased its publicity efforts since 2016, enhanced brand awareness, and expanded the market outside the province, and the advertising expenditure increased from 0.51 billion yuan in 2016 to 0.72 billion yuan in 2020, of which the proportion of national advertising expenses increased from 18% in 18 years to 32% in 20 years. Accurate and three-dimensional advertising delivery effectively covers the consumer group and helps the company's brand power to continuously improve. Management expenses have increased slightly in recent years, mainly due to the increase in salary, compensation and depreciation expenses year by year, and the management expense ratio has remained stable.
Horizontal comparison of regional leading liquor companies' Yingchao Tribute Wine, Gujing Tribute Wine, Kouzi Cellar, Elite, Tianyoude Wine:
From the perspective of profitability, the company's gross profit margin and net profit margin have steadily increased from 56.0% and 9.9% in 2013 to 62.5% and 19.1% in March 2020, and the reasons for the gradual upward trend in profitability are mainly: 1) The company's product structure continues to upgrade, and the proportion of medium and high-end liquor sales is growing rapidly, while the gross profit margin of low-grade liquor is relatively low, and the proportion declines significantly. 2) The company has raised prices twice in 2017 and 2020. The gross profit margin in 2017-2019 declined slightly, mainly due to the company's low-end products to increase the control of channel terminals in non-monetary ways such as tasting, high-end products due to 100-200 yuan of product operating income accounted for an increase in the proportion of products, the development of markets outside the province led to an increase in the cost of main business. We expect that with the further optimization of the product structure, high-grade liquor will continue to increase in the volume of 100-300 yuan products, and the gross profit margin is expected to continue to increase. In terms of horizontal comparison, the net profit margin and gross profit margin of Jinhui liquor are in the middle of the industry, which is caused by the relatively low proportion of high-grade liquor in the Liquor market in Gansu and the slightly slower rate of consumption upgrading.
From the perspective of cost control, the company's sales expense rate is at the midstream level of the industry, and the management expense rate is higher than that of similar companies. The company's sales expense level remained at 15%, of which transportation costs and business promotion costs remained basically stable, and the main increase came from advertising expenses and wages and salaries. We judge that the company will maintain the current investment in advertising, and in the future, the nationwide advertising expenditure will continue to grow, the promotion of high-end products will further increase, and the regional advertising expenditure will remain stable. The company's management expenses have gradually increased in recent years, mainly due to the increase in salary, compensation and depreciation expenses year by year. As the company deepens its business in the province and the northwest, the salary and salary should continue to grow steadily. The company's depreciation expenses are mainly 15 years of IPO technical transformation projects, 17 years of Tianhe governance and 20 years of two staff dormitory building projects, the company's infrastructure construction is basically completed, and the future depreciation should be gradually reduced. We expect the company to further accelerate the increase in the market share and the expansion rate outside the province in the short term, and the overall expense ratio is expected to remain stable.
6 Profit forecasting and investment analysis
6.1 Profit forecast assumptions are split from the business
Sales assumptions: In recent years, the company has grasped the trend of consumption upgrading, the product structure upgrade is obvious, during the outbreak of the epidemic, the company's high-end liquor still achieves nearly 30% of the rapid growth, considering that the mainstream price band of liquor in Gansu Province is rising from below 100 yuan to 100-300 yuan, the company focuses on the price band of more than 100 yuan, we expect that the sales of high-end liquor in 21-23 years will increase significantly, the growth rate will remain at about 30%, and the sales volume of low-end liquor in 21-23 years will decline, the proportion will become lower, showing a negative growth trend;
Ton wine price assumption: liquor industry into the third stage of growth, consumption upgrading is a long-term trend, the company benefited from regional channel expansion, product structure steady improvement, 21-23 years of liquor business tonnage price growth rate is expected to be relatively stable, mainly affected by product structure upgrades, it is expected that 21-23 years of high, medium and low grade tonnage wine prices to maintain 5%, 3%, 0% growth rate;
Expense rate assumption: The company is currently focusing on creating high-end products, and is in the stage of regional expansion, advertising expenses, employee compensation, freight, business promotion costs are expected to rise, it is predicted that the sales expense ratio will remain 15% in 21-23 years, and the management expense ratio will remain about 10% in 21-23 years. The total expense ratio during the period showed a stable trend overall.
(This article is for informational purposes only and does not represent any of our investment advice.) For usage information, see the original report. ）
Featured report source: [Future Think Tank].