Text: Si Fanxing
Source: Bowang Finance
The highly involuted dairy industry is accelerating its differentiation.
The dividends of the leading dairy enterprises are getting bigger and bigger, Yili and Mengniu are full of oppression, the duopoly market is stable and growing against the trend, the integration of other regional small and medium-sized players is accelerating, survival has become more and more difficult, and the profits of many dairy companies have fallen.
Among them, New Hope Dairy (hereinafter referred to as New Dairy), which takes "freshness" as the core theme and takes low-temperature fresh milk and low-temperature yogurt as the core key categories, has continued to grow in recent years under the siege of giants.
According to the financial report, in the first three quarters of 2023, New Dairy achieved a total revenue of 8.19 billion yuan, a year-on-year increase of 9.5%, a net profit attributable to the parent company of 380 million yuan, a year-on-year increase of 22.8%, and a net profit of 390 million yuan after deducting non-attributable to the parent company, a year-on-year increase of 58.1%.
The revenue and profit of the financial report are very good, but the paradox is that its stock price and performance are showing a situation of ice and fire.
In the past year, the share price of New Dairy has fallen from the highest point of 17.89 yuan / share, and as of April 18, the share price was 9.97 yuan / share, a decline of 45%.
Source: Baidu Stock Market
Why is it not recognized by the capital market, and is there a hard flaw in the operation of the enterprise?
01
Mergers and acquisitions are also mergers and acquisitions, and mergers and acquisitions are also failures
It is no exaggeration to say that the history of the development of the new dairy industry is a history of mergers and acquisitions.
At the beginning of entering the dairy industry, New Hope Dairy formulated a clear development plan: acquisition, integration, linkage and nationalization. Compared with the slow growth of endogenous operation, New Dairy chose epitaxial mergers and acquisitions to achieve rapid growth.
Before listing on the Shenzhen Stock Exchange in 2019, New Dairy successively acquired 11 dairy companies such as Sichuan Yangping Dairy, Hebei Xintianxiang, Hangzhou Shuangfeng, and Chongqing Tianyou by virtue of the capital advantages of its parent company.
After listing, in order to accelerate the strategic synergy of the industrial chain, in July 2019, New Dairy invested 709 million yuan to become the second largest shareholder of Modern Dairy, second only to Mengniu. Modern Dairy is the largest cattle breeding and raw milk production enterprise in China, operating 26 10,000-head ranches in 7 provinces and cities across the country, including Sichuan, Anhui, Hebei and Shandong.
In May 2020, New Dairy acquired 100% of the equity of Huanmei Dairy, the parent company of Xia Jin Dairy, for 1.711 billion yuan. At that time, as a leading dairy enterprise in the northwest region, Xia Jin had more than 400 stable distributors, with a market share of more than 50% in Ningxia and an annual income of 1.5 billion.
In January 2021, New Dairy spent another 231 million yuan to acquire a 60% stake in "One Yogurt Cow".
There is no doubt that continuous large-scale mergers and acquisitions and exchanging capital for scale have allowed New Dairy to quickly enter the camp of tens of billions of revenues. Of course, the sequelae of the M&A model are gradually emerging.
In November 2023, New Hope Dairy announced the transfer of a 45% stake in "One Sour Milk". Although the reason for New Hope Dairy's transfer of equity is related to the company's strategic planning adjustment, it may be more because "a sour milk" has lost money for three consecutive years, and New Dairy can't stand it.
Before the merger and acquisition in 2021, a yogurt cow's revenue from 2019 to 2020 was 240 million yuan and 202 billion yuan, and the net profit was 35 million yuan and 31.6 million yuan, respectively.
After the acquisition, in the first three quarters of 2023-2023, the revenue of a yogurt cow will be 208 million yuan and 235 million yuan respectively, achieving a net loss of 9.9178 million yuan and 4.1629 million yuan.
If the previous mergers and acquisitions of New Dairy were to integrate the dairy industry chain into its own system to enhance the hardware strength of milk sources, logistics and channels, then the mergers and acquisitions of "a yogurt cow" are more inclined to improve the software strength of traffic, channels and users to enhance their own products, marketing and market capabilities.
However, mergers and acquisitions are a double-edged sword after all, the quality of the target and the empowerment of enterprises, business synergy is the key to success or failure, and going around and around will eventually drag down the performance and produce new problems, and the new dairy industry is paying for the sequelae of mergers and acquisitions.
02
High debt, financial crisis
In addition to the performance dragged down by the operating side, the debt risk of high debt caused by the road of high leverage in mergers and acquisitions is more worthy of attention.
At that time, when New Dairy applied for an IPO, the asset-liability ratio of up to 76% was eye-catching. After listing, in the third quarter of 2019-2023, the asset-liability ratios of New Dairy were 61.66%, 66.65%, 69.81%, 71.91%, and 70.48%, respectively, much higher than the industry average of 45.08%.
With continuous growth, it is clear that the new dairy industry has not yet come out of the shadow of high debt.
Therefore, in the new five-year strategic plan, in addition to the strategic adjustment of mergers and acquisitions to endogenous, efforts to reduce the debt ratio by 10 percentage points have also become an important part of the strategy.
In addition to high debt, multiple mergers and acquisitions have also brought excessive goodwill value to New Dairy. As of the end of 2023, New Dairy's goodwill was RMB1.19 billion, accounting for 12.5% of total assets.
Song Liang, an analyst at Dairy, said: "There is more goodwill on the balance sheet of New Dairy due to the acquisition premium, and if the performance of the target is not as expected, it cannot be ruled out that there will be a goodwill impairment problem." ”
According to the data of Cheese Wealth, as of now, the goodwill of New Dairy accounts for 43% of its net assets, and the risk of goodwill impairment is very high. Interest-bearing debt accounts for 59% of all invested capital, and debt servicing pressure is also high.
In addition, although the continuous acquisition has expanded the scale, the profitability of New Dairy has not improved significantly.
From 2019 to 2022, the net profit margin of New Dairy was 4.43%, 4.29%, 3.81%, and 3.62% respectively, which not only showed a downward trend year by year, but was also far lower than the industry average of 6.36%. At the same time, in 2022, the gross profit margin of New Dairy will hit a new low in nearly 9 years, at 24.04%.
Faced with the risk of multiple risks, the new dairy industry had to adjust its strategy to slow down the pace and begin to cultivate its internal strength.
In May 2023, New Dairy released a new five-year strategic plan, indicating that endogenous growth will be the mainstay, supplemented by mergers and acquisitions.
From the perspective of strategic adjustment, at that time, New Dairy was obviously aware of the excessive risk of mergers and acquisitions, and in order to improve the sustainability and stability of development, it hoped to improve its performance and market share through its own development and operation.
03
How high is the ceiling for low-temperature fresh milk?
In 2010, Xi Gang, President of New Dairy, established the "fresh strategy", focusing on creating "double-strong" products of low-temperature fresh milk and low-temperature yogurt, and forming a "fresh category" innovative product matrix.
Delving into the reasons behind it, at that time, whether it was brand influence or market share, compared with Yili and Mengniu room temperature milk, New Dairy did not have any competitive advantage.
Therefore, in order to avoid the head-to-head confrontation of giants in the room temperature milk market, New Dairy chose "differentiated" development.
At present, in the field of low-temperature fresh milk, New Dairy has launched 24-hour platinum all-excellent milk, today's fresh milk shop, Vipshop organic milk, "Vip" Jersey milk, pure "A2" fresh milk and other products;
According to the data, in 2022, the revenue from low-temperature products of New Dairy will account for more than 50%, of which low-temperature fresh milk will achieve a year-on-year growth of more than 15%, and the national market share will exceed 10%.
It can be seen that after years of accumulation and precipitation, the first-mover advantage of the new dairy industry has given it a certain market competitiveness, but low-temperature fresh milk is still in line with the changes in consumer demand in China, but it has not yet ushered in the stage of large-scale rapid growth. Xi Gang said that the main reason is that the facilities have not been built, and the milk source and cold chain are the key to promoting high-quality pasteurized milk.
Previously, the fresh milk disinfection technology was mainly pasteurization, which was sterilized at a temperature of 72-85 °C for 15s, which could almost eliminate harmful pathogens in raw milk without destroying the nutrition of milk, but the shelf life of pasteurized milk was 5-7 days, the sales radius was limited, and it could only be quickly distributed within a range of about 300 kilometers from the milk source, and the cost was relatively reasonable.
Therefore, the competition of low-temperature fresh milk eventually returns to the competition in milk source and cold chain transportation, and the new dairy industry obviously has a big gap with the first-echelon industry giants such as Yili and Mengniu in terms of comprehensive strength.
In recent years, many dairy subdivisions have touched the ceiling, more and more dairy companies firmly believe that low-temperature milk will become a new track and the second growth curve of dairy enterprises, the brand has accelerated influx, the industry has become more and more crowded, enterprise survey data shows that there are 68,500 fresh milk-related enterprises in China.
Mengniu Fresh Milk Division launched "Daily Fresh Talk" and "Modern Ranch", with sales reaching 3 billion yuan in 2022. Yili launched "Yili", "Jindian" and "Ranch Morning" fresh milk, with sales of more than 1 billion yuan in 2022.
At the same time, Beijing's Sanyuan Dairy, Shanghai's Bright Dairy, Guangzhou's Yantang Milk, Northeast Wandashan, and local dairy enterprises are all tending to dominate on their own, forming a competitive pattern of separation.
In the context of such a scuffle, on the one hand, the previous differentiation strategy failed, and the living space of the new dairy industry was inevitably greatly squeezed.
In the southwest region, where the proportion of new dairy industry is relatively high, about 50% of the market share is occupied by the two leading companies of Yili and Mengniu, and East China is occupied by Bright Dairy.
On the other hand, the industry is in chaos, according to the New Consumption Finance Research Agency, low-temperature dairy products have a short shelf life, and in order to complete the sales task, many products are channeled to milk stations or milk convenience stores by e-commerce platforms, resulting in chaos in the price system. Moreover, low-temperature milk products are not easy to sink into lower-tier cities, and the market potential is also easily limited by the "ceiling", which will increase the uncertainty of the future for the new dairy industry, which takes low-temperature milk products as the core of the company's development.
In the face of the chaotic fresh milk market, why will New Dairy win in this fierce battle in the future?
End
Focus on the differentiated entry of the low-temperature market, and grow into a 10 billion dark horse by virtue of the merger and acquisition strategy, but with the advancement of time, the concentration of the dairy industry continues to increase, the competition in the low-temperature track intensifies, and the new dairy industry with mergers and acquisitions as the core competitiveness gradually loses its competitiveness.