Dongpeng Beverage, about to "collapse"?

Listing | 妙投APP

Author | Li Yujia

Header | Visual China

On the evening of April 14, Dongpeng Beverage, the parent company of "Sleepy and tired, drink Dongpeng Special Drink", announced its 2023 financial report, which is basically consistent with the previously disclosed performance forecast, and will continue to grow rapidly in 2023 under the national expansion.

The total revenue for the full year of 2023 will be about 11.263 billion yuan, a year-on-year increase of 32.42%, and the net profit deducted from the non-attributable parent company will be 1.87 billion yuan, a year-on-year increase of 38.29%. In 2023Q4 alone, the total revenue increased by 40.88% year-on-year, and the net profit deducted from non-attributable to the parent increased by 27.72% year-on-year.

(Data source: choice data)

However, such a considerable growth rate did not make Dongpeng's share price rise sharply, and its stock price opened up less than 1% the next day, and finally closed up 4.45% in the afternoon as the market strengthened. And on the eve of the release of the financial report (April 10), Dongpeng also had a large transaction of 220 million yuan discount, with a discount rate of 10.49%.

Miaotou believes that the reason behind this is that the pressure on the fundamentals of Dongpeng Beverage will be much more severe than the 2023 financial report shows.

On the one hand, the market supply and demand of energy drinks are undergoing fundamental changes, and it is difficult for Dongpeng Beverage to maintain a high growth rate of 40%+ only by continuing to penetrate nationwide. On the other hand, Dongpeng's second growth curve has not yet been fully formed, and it is not enough to undertake rapid growth in performance in the short term.

Coupled with the imminent lifting of the ban on the original stock in May, Dongpeng's stock price, which has always been extremely strong, will it be able to hold on to it?

#01红牛失势, Dongpeng rises

Dongpeng's rapid growth in the past two years is fundamentally due to the relaxation of the industry competition pattern.

After the big brother of domestic energy drinks "Red Bull" lost ground, the competition pattern of the industry was suddenly relaxed, and Dongpeng Beverage relied on the differentiated "cost-effective" strategy to rise rapidly.

First of all, I would like to briefly introduce to you the competitive landscape of the energy drink industry in the past few years.

In 1995, Reignwood Group introduced Red Bull from Thailand and established a joint venture with China Red Bull, which opened the domestic energy drink market.

Contrary to the low-priced market structure of Thai Red Bull, Chinese Red Bull has adopted a high-priced strategy from the beginning, which has given other energy drink companies huge room to sink. After 2016, China Red Bull (Reignwood Group) and Thailand's Red Bull repeatedly lost the trademark dispute, unable to carry out effective advertising, and the distribution channels were affected.

The second-echelon energy drink enterprises represented by Dongpeng Special Drink seized the strategic window period and quickly seized the sinking market with the differentiated strategy of "cost-effective" and relatively low cost delivery.

Based in Guangdong, a province with a large migrant population and beverage consumption, Dongpeng focuses on the market segment of blue-collar workers, and expands the consumption scenarios of energy drinks to long-distance driving, staying up late at night, and opening black Internet cafes. The product design also uses lower-cost plastic bottles, which further strengthens the cost-performance advantage.

In terms of channel strategy, Dongpeng Special Beverage focuses on special channels such as factory stores, gas stations, and highway rest stations to better reach its target customers.

At that time, the domestic economy was developing rapidly, there was a wide range of blue-collar classes, energy drinks were in demand for them, and they were extremely sensitive to price, so Dongpeng's cost-effective strategy was very correct and successful.

Especially after Red Bull lost ground, the industry competition slowed down, and the cost-effectiveness ratio of Dongpeng's marketing delivery increased significantly, such as the cost-effectiveness ratio of sales expenses (the revenue brought by every 1 yuan of sales expenses) increased sharply from 3.14 yuan in 2018 to 4.28 yuan, and then increased year by year, until 2023 began to decline.

(Data source: choice data)

Therefore, even if Dongpeng is priced at the low end in the early stage, the company's gross profit margin can be rapidly improved, so as to further realize the expansion of production capacity, leverage a larger market scale, and the business link is very smooth.

However, after the rapid increase in industry penetration from 2019 to 2021, the relationship between supply and demand in the energy drink market has begun to tilt, and the relaxed competitive environment on which Dongpeng's low-price strategy depends is deteriorating, and the market is returning to fierce competition.

#02基本盘竞争恶化

On the one hand, most of the low-end energy drink market has been tapped, and the penetration rate of the first stage of industry development has reached the ceiling. On the other hand, the blue-collar basic employment population on which Dongpeng Beverage relies is declining, and it will have to grab a share in the stock market in the future.

According to the data of the Toubao Research Institute, the current domestic consumers of energy drinks are mainly drivers, accounting for 66%. The age is mainly 41-50 years old, accounting for 34%.

With the slowdown in the growth of the secondary and tertiary industries, the total number of blue-collar employees has continued to decline since 2022. In 2022, the size of the blue-collar employment population will decline for the first time, and among the more than 730 million employed people in the country, the number of people in the secondary industry will drop from about 217 million to about 211 million, and the number of people in the tertiary industry will drop from about 359 million to about 346 million.

 (The blue-collar labor group mainly refers to the industrial workers in the secondary and tertiary industries, and in the mainland's labor market, blue-collar workers are the main component of the mainland's employment group)

Is there any hope that the white-collar class will become the next core customer group of Dongpeng Special Drink?

Although Dongpeng Special Drink has been strengthening the brand symbol of "drink Dongpeng Special Drink when you are tired and sleepy", coffee and tea are the first choice for most white-collar workers, and energy drinks have almost never entered the list of white-collar workers.

On the one hand, mass energy drinks are essentially nothing more than drinks made from very readily available raw materials such as caffeine and taurine, which is contrary to the current trend of promoting natural and healthy beverage consumption in the beverage market.

On the other hand, because Dongpeng's sales system focuses on special channels, which is far away from white-collar workers, on the contrary, coffee shops can provide higher convenience, so in recent years, white-collar workers have become more and more inclined to supplement their physical energy through coffee.

According to incomplete statistics, 38.18% of the surveyed consumers prefer coffee mainly because of the portability of coffee, and 29.09% of the surveyed consumers believe that coffee is healthier than completely artificially blended energy drinks.

Therefore, although coffee and energy drinks are both refreshing drinks, coffee consumers are not only not potential customers of energy drinks, but are very likely to encroach on the energy drink market with the improvement of consumption levels in the future.

According to NielsenIQ data, in the first half of 2023, the sales of China's energy drink market increased by 2.44% year-on-year, and the sales of ready-to-drink coffee market increased by 12.35% year-on-year.

While the increase in demand for energy drinks is decreasing, the supply is becoming more and more crowded.

In 2019, Red Bull's trademark dispute brought a good opportunity for domestic brands to gain market share, so more and more domestic brands crossed over into the energy drink industry.

At present, the energy drink track already has many brands such as Red Bull, Dongpeng Special Drink, Lehu, Physical Energy, War Horse, Enough Burning under Uni-President, XS under Amway, and Huanxingyuan under Yili. In the past two years, Jianlibao (Chaodeeng), Yuanqi Forest (Big Demon King), Budweiser, PetroChina, etc. have also laid out the energy drink track, and the competition in the energy drink industry is bound to become more fierce in the future.

The homogenization of energy drinks is serious, the barriers to market competition are weak, and the key to winning in the future is nothing more than "throwing money", using high marketing to achieve channel breakthroughs and terminal penetration.

This also means that in the future, Dongpeng is bound to increase expenses to cope with more fierce competition.

According to Dongpeng's 2023 financial report, in 2022 and 2023, its sales expenses will grow by 5.91% and 34.94% year-on-year respectively, and management expenses will increase by 1.54% and 44.25% year-on-year respectively.

(Data source: choice data)

With the price of plastic packaging and taurine rising year after year, Dongpeng continues to compete at low prices and gradually saturate the sinking market, which has outweighed the losses, and its profitability is likely to be squeezed continuously, falling into the vicious competition dilemma of increasing income but not increasing profits.

#03新业务难扛增长大旗

From the experience of the Thai market, when there is no room for the price band of energy drinks in the low-end market, companies usually build higher-end sub-brands by upgrading their categories and building higher-end sub-brands with the support of high costs, so as to tap a wider consumer base and break through the homogeneous competition.

Dongpeng has long realized that Dongpeng Special Drink's pull on performance has become more and more limited, so it will start to build a diversified product matrix based on "energy +" on a large scale from 2021.

For example, in April 2021, it launched the "Dongpeng 0 Sugar Special Drink", in September 2021, it launched the low-sugar coffee drink "Dongpeng Big Coffee" shake latte, and in December 2021, it launched the "She Neng" fruit juice energy drink that conforms to the "She Economy" and mainly targets the majority of female consumers.

However, since 2021, the revenue from the sale of Dongpeng Special Drink still accounts for about 95% of the company's total revenue.

In 2023, Dongpeng officially formulated a development strategy with energy drinks as the first development curve, coffee drinks and electrolyte drinks as the second development curve, and tea drinks, room temperature citrus juice and other products as tactical and incubation products.

After another year of vigorous promotion, the total revenue from the sale of other beverages in 2023 will be about 914 million yuan, accounting for about 8.12% of the revenue, and the total profit will be about 158 million yuan, accounting for only 3.25% of the total profit.

(Data source: choice data)

However, the degree of involution in the coffee beverage and electrolyte water industry is not lower than that of the energy drink market, and it is not easy for Dongpeng to break through. And before the second development curve really comes out and the volume is enough to shake the report, what does Dongpeng's high performance growth rate rely on?

According to the consensus profit expectation of choice institutions, by 2025, the total revenue growth rate of Dongpeng Beverage will drop to about 21.85%, and the growth rate of net profit attributable to the parent company will drop to 24.35%.

(Image source: Choice Data)

Compared with this, Dongpeng's current PE (TTM) of nearly 40 times is at a high premium, which is also the fundamental reason why it is difficult to leverage higher valuations in the bright financial report.

#04巨额解禁, "the last straw"?

If the growth rate of Dongpeng's performance only declines slowly year by year in the future, there is still time for the stock price to be digested. However, the huge lifting of the ban on the original restricted shares in May is more like the "last straw" that crushes its stock price.

After all, it is not new for Dongpeng's major shareholders to repeatedly reduce their holdings and cash out and reduce their holdings and cash out immediately after the ban is lifted.

On May 29 last year, 83.26 million shares of Dongpeng's original restricted shares were lifted. The next day, Dongpeng immediately launched a shareholder reduction plan, shareholders Kunpeng Investment, Dongpeng Yuandao, Dongpeng Zhiyuan, Dongpeng Zhicheng and a number of directors, supervisors and senior managers of the company formed a group to reduce their holdings of no more than about 35,741,500 shares, accounting for nearly 43% of the number of lifting the ban in the current period, and cashed out a total of about 5.9 billion yuan based on the closing price on the day of lifting.

At that time, Dongpeng's major shareholders couldn't wait to arbitrage their behavior, which shocked shareholders, and the company's stock price fell by 3.29% and 4.26% respectively on the day and the next day.

(Image source: Choice Data)

The number of restricted shares that will be lifted in May is about 240 million shares, which is 1.7 times the current 140 million outstanding shares and 3 times the number of last lift.

Under the expectation that the performance growth rate will continue to decline in the future, such a huge lifting of the ban and the "ugly" major shareholder, Dongpeng's previously extremely strong stock price due to equity concentration will face a huge test.