With a loss of more than 2 billion, the "stock god" withdrew from the circle

In the matter of stock speculation, Yunnan Baiyao finally completely "admitted".

On January 17, Yunnan Baiyao disclosed the minutes of the investor research meeting showing that under the principle of further focusing on the main business and prudent investment, it had withdrawn from all secondary market securities investment in the third quarter of last year, and planned to no longer carry out secondary market securities investment business this year.

Subsequently, #Yunnan Baiyao withdrew from all secondary market securities investment#, #Yunnan Baiyao lost more than 2.2 billion yuan in two years# and successively appeared on Weibo hot searches.

Photo/Visual China

Looking back at the performance of the past few years, Yunnan Baiyao has long been stuck in the dilemma of weak growth of its main business and insignificant effect of new business. It's time for the former "first brother of traditional Chinese medicine" to take care of his own accounts.

From big profits to big losses

There is no such thing as a winning general in the stock market. But Yunnan Baiyao in 2019 may not have thought that it would leave the scene one day.

At that time, Yunnan Baiyao had financial asset investment for the first time in its annual report, and the prices of the four stocks it held, Jointown, Jacobson Scientific Research Pharmaceutical, Hongta Securities, and China Antibody, as well as the net unit value of six bond funds, rose as a whole, bringing it a fair value change income of 227 million yuan, accounting for 4.80% of the total profit of the year.

In 2020, Yunnan Baiyao, which tasted the sweetness, was completely stimulated, and vigorously increased and expanded the scope of investment, adding Tencent, Xiaomi, Hengrui Pharmaceutical, Moutai, Yili, and China Biotech to the list of positions. At the end of the year, its trading financial assets increased by 2.408 billion yuan from the previous year to 11.229 billion yuan.

This year, Yunnan Baiyao made a lot of money from stock speculation, and the fair value change income of that year was as high as 2.24 billion yuan, accounting for nearly 32.94% of the total profit, and directly increased the company's net profit attributable to the parent company by 31.85% year-on-year. This also made it the name of the "god of stocks" of A-share listed companies.

But the stock market soon showed its brutal side to this "super retail investor". In 2021 and 2022, its fair value change loss was 1.929 billion yuan and 620 million yuan respectively.

After the huge losses in the secondary market, the company's performance has also become unsightly. In 2021, Yunnan Baiyao's net profit attributable to its parent company fell by 49.15% year-on-year, which was the first negative profit growth in its history, and in 2022, it was only 7% higher than this figure, returning to a level close to 2016.

Photo/China News Weekly compiled from Yunnan Baiyao's financial report

Along with the shrinking profits, there is also the market value of Yunnan Baiyao. In February 2021, the market value of Yunnan Baiyao once broke through the 200 billion yuan mark, and then fell for nearly three years, and as of the close of trading on January 18, its market value was 87.112 billion yuan, evaporating more than 110 billion yuan from the peak.

Fortunately, Yunnan Baiyao has lost its way.

After the huge loss in stock speculation in 2021, Yunnan Baiyao said in an investor survey that the company will strictly control the scale of investment in the secondary market, "In 2022, within the quota approved by the board of directors, the company will gradually reduce its position and will not continue to increase its holdings." ”

Judging from the financial report, Yunnan Baiyao has indeed begun to cut meat this year. At the end of 2021, its trading financial assets decreased by 6.509 billion yuan from the previous year to 4.720 billion yuan, and by the end of 2022, they decreased again to 2.416 billion yuan, and as of the end of September 2023, the balance of this asset was only 287 million yuan.

According to the latest investor research meeting minutes, with Yunnan Baiyao disposing of its Xiaomi shares, it has officially completed the liquidation and completely quit the "negative business" of stock speculation.

Can he return to the "first brother of traditional Chinese medicine"?

It is not uncommon for listed companies to speculate in stocks. In particular, for companies with enough cash on their books, they may "have money and nowhere to spend it," an investor told China Newsweek.

According to the Economic Observer, Wind data shows that as of the interim report of 2023, a total of 615 listed companies have participated in securities investment such as stock speculation, with a total of 2,497 securities held and a cumulative investment amount of more than 1.19 trillion yuan.

The reasons for this are: "First, stock speculation can bring investment income and increase the company's non-operating income, thereby improving the company's performance; second, stock speculation can improve the efficiency of the company's capital use, because the funds invested in the stock market can be bought and sold at any time, which is more flexible than other long-term investments; in addition, listed companies can also improve the company's market visibility and influence through stock speculation," Jiang Han, a senior researcher at the Pangu think tank, told China News Weekly.

The above-mentioned investors also pointed out another possible benefit of listed companies' stock speculation, that is, to form synergies and complements with the company in the industrial chain through investment.

However, the problem is that listed companies involve the interests of their investors, so in addition to risk control through a variety of strategies, there is also a core task to maintain their main business. "Listed companies need to prudently invest in securities while ensuring the steady development of their main business," Jiang Han pointed out.

Unfortunately, Yunnan Baiyao has not done a good job of this premise, and its main business growth has been weak, and it has been accused by investors of "not doing its business properly" for a long time.

Specifically, in 2022, the sales revenue and commercial sales revenue of Yunnan Baiyao industry will only increase by 0.55% and 0.27% year-on-year, and in the first half of 2023, the growth rate of these two main revenues will recover, with a year-on-year increase of 7.77% and 15.97% respectively, but the gross profit margin will decrease by 0.43% and 0.4% year-on-year respectively.

For Yunnan Baiyao's second growth curve, the star product Yunnan Baiyao toothpaste, the company has also publicly stated that although it ranks second in the domestic market share, its business growth has also shown a downward trend. The second growth curve proposed by the company since then, namely the three business units of stomatology, medical cosmetology and new retail, has not yet brought significant results to the performance growth of Yunnan Baiyao.

At the same time, as a pharmaceutical company, Yunnan Baiyao's R&D investment is much smaller than that of stock investment. According to the financial report, in 2020~2022, Yunnan Baiyao's R&D expenses will be 181 million yuan, 331 million yuan, and 337 million yuan respectively, with a R&D expense rate of less than 1%, and by the first half of 2023, the R&D expense rate will only be 0.71%, ranking fourth from the bottom among listed Chinese medicine companies.

At a time when Yunnan Baiyao was enthusiastically speculating in stocks, Pien Tze Huang sold the core drug Pien Tze Huang lozenges to the market, which was in short supply, and finally drove Yunnan Baiyao off the throne of "the first brother of traditional Chinese medicine" at the market value level.

As of the close of trading on January 18, Pien Tze Huang's market value was 132.748 billion yuan, significantly ahead of Yunnan Baiyao, and the latest market value of Tong Ren Tang, the third largest traditional Chinese medicine stock, was 69.58 billion yuan, and the gap with Yunnan Baiyao has narrowed from 100 billion yuan three years ago to less than 20 billion yuan.

Now that Yunnan Baiyao, which has quit stock speculation and completely returned to its main business, whether it can settle down to invest in research and development and truly find a new growth curve is the fundamental reason for determining whether it can fight a turnaround battle, which is also the real expectation of investors for its value.

Resources:

Trillions of funds from listed companies enter the market to speculate in stocks: it's all about money, I don't know where to invest, September 9, 2023, Economic Observer

Author: Shi Hanxu