Producer: Sina Finance Listed Company Research Institute
Author: New Consumption Advocate / Mu Yu
Two months after the flash crash of the stock price, Baiguoyuan, the "first stock of fruit chain retail", handed over the 2023 "report card".
According to the results announcement, in 2023, Baiguoyuan Group will achieve a total revenue of 11.392 billion yuan, an adjusted net profit (measured by non-Hong Kong financial reporting standards) of about 342 million yuan, a slight increase of 0.69% and 1.12% year-on-year respectively, and a gross profit of 1.315 billion yuan, basically the same as in 2022.
Combined with the previous data, the three core profitability indicators of Baiguo Yuan have fallen into growth bottlenecks. During the period from 2021 to 2022, the company's total revenue increased by 16.22% and 9.94% year-on-year respectively, and the gross profit increased by 43.22% and 13.65% respectively compared with the previous reporting period, and the adjusted net profit increased by 284.29% in 2021.
The main business is weak, and the capital market naturally "votes with its feet". After the release of the earnings report, Baiguoyuan's share price fluctuated downward, and many institutions lowered their 2024-2026 earnings forecasts, and Morgan Stanley directly "halved" the target price to HK$3.4 per share. On April 10, the company issued a voluntary announcement stating that the controlling shareholder Yu Huiyong and the affiliated capital platform promised not to sell the relevant shares or enter into relevant sales agreements in the open market within 12 months. The move involves 693 million shares, which is approximately 43.63% of the company's total registered share capital.
Even so, it didn't stop investors from fleeing in panic. At the opening of trading on April 12, Baiguoyuan's share price fell again, and finally closed at HK$3.03 per share, a sharp decrease of 45.89% from the issue price. As of the date of publication, the company's share price continued to fall to HK$2.95 per share, with the latest market value of about HK$4.686 billion, which has fallen by 55.37% compared with the "peak" market value of 10 billion on the first day of listing, and even lower than the post-investment valuation of the first round of financing in 2015.
The cumulative number of paid members increased by more than 200,000, but the sales of franchised stores fell by nearly 9%
Hundred Fruit Garden's annual report is not all bad news.
According to the disclosed operational data, the number of members of Baiguoyuan increased by 13.34% from 74.03 million in 2022 to 83.91 million during the reporting period, of which the number of paid users increased by more than 200,000, an increase of more than 21% year-on-year. The cumulative number of users who used WeChat Mini Programs reached 68 million, and the total number of fans in the WeChat fan group of about 27,000 stores exceeded 16.2 million, an increase of 25.6% over 2022.
At the same time, the number of offline franchised stores of Baiguoyuan has further increased. In 2023, there will be a net increase of 241 franchised stores managed by the Group to 4,818, and a net increase of 209 to 1,263 franchised stores managed by other trustees, driving the total number of franchised stores to increase by nearly 8 percentage points year-on-year.
However, it is interesting to note that the user base, paid memberships, private domain traffic and offline stores have all maintained an upward trend, and the fruits of Baiguoyuan have not been sold.
During the reporting period, the total retail sales of the Company's offline stores and online distribution channels decreased by 2.81% year-on-year to approximately RMB14.171 billion, the sales revenue of fruits and other food products in the franchised stores managed by the Group was approximately RMB8.495 billion, compared with approximately RMB8.850 billion in 2022, the sales revenue of products in self-operated stores shrank by 21.66% year-on-year to RMB47.833 million, and the sales revenue of online channels decreased by RMB17.359 million year-on-year.
The revenue side is under heavy pressure, and franchised stores are the first to bear the brunt. Based on the simple estimation of the sales revenue and number of franchised stores managed by the group, the single-store sales of the franchised stores managed by Baiguoyuan in 2023 will be about 1.7632 million yuan, a decrease of 8.81% compared with 1.9336 million yuan in 2022, hitting the lowest point since 2019, and the average monthly sales of a single store will be less than 150,000 yuan.
According to incomplete statistics from Narrow Door Restaurant, Baiguoyuan's offline stores in first-tier and new first-tier cities account for 59.05%, most of which are located near the community. If calculated according to the cost of rent, water and electricity properties and employee salaries in first-tier cities of 100,000 yuan per month and the gross profit margin of stores of 30%, without considering fruit loss and other operating costs, the monthly sales of franchised stores must achieve at least 36-375,000 yuan to ensure the break-even, which is about 2.5 times of the actual average monthly sales.
The stores are unable to make ends meet, the payback cycle is constantly being extended, and the attractiveness of Baiguoyuan to potential franchisees has weakened significantly. In 2023, the number of franchised stores managed by the group will only increase by 5.27% year-on-year, while the indicators from 2020 to 2022 will be 5.50%, 9.30% and 7.59% respectively, which is not the same as the 50%-70% growth rate before 2018.
315 is shoddy, and the turmoil is difficult to calm down, and the transformation of ToB Buhong Jiu Fruit is in the footsteps?
Another negative effect of reduced revenue per store is that franchisees choose to sacrifice quality and service in order to ensure profit margins.
During the 315 Consumer Rights Day, Baiguo Yuan was exposed to using spoiled fruits to make fruit cutting platters, overnight fruits to be sold as fresh fruits the next day, and arbitrarily tampering with fruit grades to be shoddy. After the fermentation of public opinion, Baiguoyuan responded that it would suspend the franchise stores involved for rectification and conduct a comprehensive and thorough investigation, organize all stores across the country to conduct self-inspection and self-correction, and hold the relevant responsible persons and management accountable.
Obviously, this treatment will not be able to quell the anger of the public. Since its establishment, Baiguoyuan has been taking the route of mid-to-high-end high-quality fruits, and the price of similar products is 1.5-2 times that of fresh e-commerce platforms and offline supermarkets. However, the high-profile fruit grading system and quality assurance are in vain, and consumers are reluctant to pay a brand premium that is much higher than the value of the product itself. On the Black Cat complaint platform, the cumulative number of complaints in Baiguoyuan has exceeded 2,400, and most of the complaints after 315 are related to balance refunds and membership fee refunds.
(Source: Black Cat Complaint)
At this point, Baiguoyuan's franchised stores seem to have fallen into a vicious circle: sales are less than expected, revenue is "cliff-like" reduced, and stores pursue high profits by shoddy, coaxing members and other illegal methods. The collapse of brand reputation and consumer trust has led to a sharp drop in store sales and a continuous decline in revenue.
Or realizing that the C-end fruit retail business has high losses, low gross margins, and difficult compliance and management risks, Baiguoyuan decided to turn to the B-side.
In October 2023, the investment platform of Baiguoyuan signed an equity transfer agreement with Tiantu Investment to acquire 19.58% of the equity of Shenzhen Panguo Technology Co., Ltd. (hereinafter referred to as Panguo Technology) at a cash consideration of 14.3766 million yuan. Combined with the equity obtained in the first round of joint investment with Tiantu Investment in 2019, Baiguoyuan holds a total of 51% of the shares of Banguo Technology after the completion of this round of transactions.
According to public information, Fanguo Technology, founded in 2019, is a B2B platform enterprise that uses the main warehouse as the collection and distribution center and provides fresh fruit procurement and sales agency services for small wholesalers and retail buyers through the city warehouse. The company has built transit warehouses in 178 cities, with more than 500,000 registered users on the platform, serving more than 70,000 fresh fruit stores, and the total merchandise transaction volume in 2023 will be about 3.068 billion yuan.
After the acquisition of Panguo Technology, Baiguoyuan's domestic and foreign direct sales business has improved significantly. During the Reporting Period, the Company's sales of fruits and fruit products exported to ToB customers in overseas markets increased by approximately 62% year-on-year to RMB250 million, while total sales from ToB customers in the domestic market increased by 37.2% year-on-year to RMB782 million, and the total direct sales revenue exceeded RMB1 billion for the first time.
However, the transformation of the B-end fruit wholesale business may not be a good medicine, and Baiguoyuan's competitor Hongjiu Fruit is a lesson from the past.
According to Hongjiu Fruit's semi-annual report, due to the long overall payment cycle of terminal wholesalers, the company's trade and other receivables in the first half of 2023 will reach 10.151 billion yuan, and accounts receivable account for about 92.41% of current assets. According to a March 28 announcement, the balance of advance payments made by the company to certain suppliers amounted to 4.2 billion yuan as of January 31, 2024.
The intricate accounts receivable and prepayment have made Hongjiu Fruit's cash flow tight for a long time, and it is also the "main culprit" of its annual report "difficult birth" and stock suspension. Unable to obtain the information required to audit the 2023 financial results, accounting firm KPMG resigned as auditor on 16 April, and three non-executive directors also announced their resignations.
It is not difficult to see that the development of ToB direct selling business requires heavy asset investment in the construction of the supply chain, and also has sufficient capital to ensure the stability of fruit quality and quantity. As of the end of 2023, Baiguoyuan's cash and cash equivalents are about 2.115 billion yuan, and whether it can support Baiguoyuan's ambition to transform remains to be verified by time.