Economic Observation Network Reporter Zheng Huixin On the evening of May 18, Kweichow Moutai (600519. SH) announced that it will contribute a total of 10 billion yuan to participate in the establishment of two private equity investment funds, acting as a limited partner (LP).
In addition to Moutai, many wine companies have joined the LP army: on May 9, Luzhou Laojiao and Guotai Junan held a signing ceremony for a strategic cooperation agreement, according to which the two sides will jointly explore the joint construction of industrial funds and merger and acquisition funds in the future; Wuliangye, Yanghe, Jinshi Yuan and other wine companies have announced corresponding plans.
Where are the funds that wine companies participate in investing? According to the statistics of the Economic Observation Network reporter, funds have generally flowed to food, medicine, new materials and other industries.
Why did wine companies start LPs? This is inseparable from the full cash flow of wine companies, taking Kweichow Moutai as an example, its sales gross margin has long exceeded 90%, and its profitability is among the best in the entire A-share market, at the end of the first quarter of 2023, Kweichow Moutai cash and cash equivalents balance was 157.819 billion yuan, many wine companies also have a lot of cash on their books, and "investment" is considered by wine companies to be one of the ways to improve the efficiency of capital use.
Wine companies have become LPs
The names of the two funds of Moutai are Moutai Zhaohua (Guizhou) Industrial Development Fund (Limited Partnership) (hereinafter referred to as "Moutai Zhaohua Fund") and Moutai Jinshi (Guizhou) Industrial Development Fund (Limited Partnership) (hereinafter referred to as "Moutai Jinshi Fund"), both funds have an investment period of 5 years, an exit period of 5 years, in the form of a limited partnership, Kweichow Moutai is a limited partner, and the subscribed capital contribution ratio is 90.7441%.
The fund manager of Moutai Zhaohua Fund is China Merchants Capital Management, and the fund manager of Moutai Jinshi Fund is Jinshi Investment.
The investment scope of these two industrial funds includes but is not limited to investment opportunities in the fields of new generation information technology, biotechnology, new energy, new materials, high-end equipment, and large-scale consumption.
This is not Moutai's first time as an LP.
In 2015, Kweichow Moutai Distillery (Group) Co., Ltd., as a major shareholder, established Moutai Jianxin (Guizhou) Investment Fund Management Co., Ltd., which was later renamed Moutai (Guizhou) Investment Fund Partnership (Limited Partnership) with CCB (Beijing) Investment Fund Management Co., Ltd. and Moutai (Guizhou) Private Equity Fund Management Co., Ltd.
Moutai (Guizhou) Private Equity Management Co., Ltd. was established in 2014 as a company 51% owned by Kweichow Moutai Distillery (Group) Co., Ltd. and 49% invested by CCB (Beijing) Investment Fund Management Co., Ltd.
In 2017, Wuliangye invested 100 million yuan to participate in the establishment of Yibin High-end Growth Industry Investment Guidance Fund; In March 2018, the "Yibin Wuliangye Rural Revitalization and Development Fund", which subscribed 500 million yuan and held 50% of the shares, officially passed the audit and filing of the Asset Management Association of China, becoming the first rural revitalization fund in China.
Luzhou Laojiao as an LP funds include Luzhou Puquan Private Equity Investment Fund Management Co., Ltd., Sichuan Golden Helm Investment Co., Ltd. and so on.
In 2016, Jinshi Yuan and GF Xinde Investment Management Co., Ltd. jointly initiated the establishment of "Zhuhai GF Xinde Jinyuan Equity Investment Fund (Limited Partnership)"; In 2018, Jinshi Yuan established a wholly-owned subsidiary with the business scope of "investment management", and issued an announcement to officially include investment and financial management activities in the main daily business of the subsidiary; In 2019, Jinshi Yuan participated in the investment and establishment of "Jiangsu Zijin Hongyun Health Industry Equity Investment Partnership (Limited Partnership)".
Yanghe also mentioned in its announcement in January this year that it agreed that the company would invest 3 billion yuan with its own funds to establish a wholly-owned subsidiary and jointly invest with professional investment institutions, and the established Huatai Yanghe Fund of Funds has been filed with the Asset Management Association of China, and the fund manager is Huatai Zijin Investment Co., Ltd.
Where to go
The funds of these wine companies have flowed to emerging industries such as food, medicine, new materials, and semiconductors.
In the investment territory of Moutai (Guizhou) Investment Fund Partnership (Limited Partnership), there are Brala Group Co., Ltd. in the garment industry, Sichuan Baijia Ah Kuan Food Industry Co., Ltd. in the food industry, Peak China Co., Ltd. in the sports industry, and Guohuan Food and other companies, and indirectly invested in China Salt Industry Co., Ltd.
Wuliangye Investment's Yibin High-end Growth Industry Investment Guidance Fund invested in Yibin Accor New Materials Co., Ltd. and Sichuan Yawei New Materials Co., Ltd., both of which were established for two years. In addition, Yibin Wuliangye Rural Revitalization and Development Fund has invested in Wuming Tea Industry, Yibin Sichuan Black Tea Industry, Sichuan Zaobaijian Tea Industry and other companies.
Luzhou Puquan Private Equity Investment Fund Management Co., Ltd., invested by Luzhou Laojiao, indirectly invested in Yonghui Cai Food, Hangzhou Zhongxin Wafer Semiconductor, Xinjiang Meike Chemical Co., Ltd., etc.
Zhuhai Guangfa Xinde Jinyuan Equity Investment Fund invested in Guangzhou Lucheng Agricultural Products and Guangzhou Multitouch E-commerce Media Co., Ltd. Jiangsu Zijin Hongyun Health Industry Equity Investment Partnership (Limited Partnership) has invested in biomedical and medical device companies such as Shenzhen Xinjunte Intelligent Medical Device Co., Ltd., Shanghai Gusen Pharmaceutical Co., Ltd., and Nanjing Norman Biotechnology Co., Ltd.
Among these projects, Kweichow Moutai's indirect investment of Ah Kuan Food and Guohuan Food Exchange are in the listing process.
Why start an LP
Most of the capital of wine companies as LPs is their own funds.
Kweichow Moutai said in the announcement that the source of the fund is its own funds. At the end of 2022, the balance of cash and cash equivalents on the books of Kweichow Moutai was 152.379 billion yuan, accounting for 74.32% of the net assets of 204.965 billion yuan. In 2022, Kweichow Moutai will pay dividends of 32.549 billion yuan, even after subtracting the dividend amount, Kweichow Moutai will continue to maintain abundant cash flow of more than 100 billion yuan.
Similarly, other wine companies have a strong cash flow. Wuliangye's cash and cash equivalents balance at the end of the first quarter of 2023 was 98.903 billion yuan, Yanghe Co., Ltd.'s cash and cash equivalents balance at the end of the first quarter was 24.413 billion yuan, and Luzhou Laojiao was 24.867 billion yuan.
The abundant capital of these wine companies mainly comes from operating cash inflows. Since its listing, Kweichow Moutai's operating income and net profit have maintained growth for 23 consecutive years, from 1.618 billion yuan in 2001 to 127.554 billion yuan in 2022, and the net profit attributable to the parent has increased from 328 million yuan in 2001 to 62.716 billion yuan in 2022.
According to statistics, from 2001 to 2022, Kweichow Moutai achieved a cumulative net profit of 393.142 billion yuan. Among them, in addition to the 208.653 billion yuan used for dividends, other funds are mainly used for fixed asset investment and wealth management.
From the investment in fixed assets in recent years, it can be seen that the expansion of the main business of Moutai Brewing is not enough to absorb the huge cash inflow. From 2020 to 2022, Moutai's operating net cash flow was RMB51.669 billion, RMB64.029 billion and RMB36.699 billion, respectively, while cash paid for fixed asset investment was only RMB2.1 billion, RMB3.4 billion and RMB5.3 billion.
The two newly established funds in Kweichow Moutai set the basis for accruing performance remuneration at an annualized rate of 6% (simple interest), and according to the fund's income distribution regulations, 80% of the fund limited partners will be distributed to the fund limited partners if there is a balance after obtaining the return of the paid-in capital contribution to the fund and the basis income distribution of performance remuneration.
Kweichow Moutai said that the main purpose of participating in the establishment of the fund is to improve the return on funds and create value for all shareholders with the advantages of professional investment institutions.
A liquor listed company that set up a fund told the Economic Observation Network reporter that the investment of liquor enterprises in equity funds is a financial investment behavior, the goal is to obtain income through investment, which belongs to asset management allocation. Equity funds invest in industries that conform to national policies, develop rapidly and have better prospects.
Wine companies such as Moutai, Wuliangye, Luzhou Laojiao, and Jinshi Yuan emphasized that investment does not affect the main business, nor will it deviate from the main business.