Yangtze River Business Daily News ● Yangtze River Business Daily reporter Zhang Lu
"The first share of liquor circulation" Huazhi Liquor Store (300755. SZ) revenue exceeded 10 billion for the first time, but the company's current situation is hardly optimistic.
Recently, Huazhi Liquor Company released its 2023 financial report. According to the data, the company will achieve revenue of 10.121 billion yuan in 2023, a year-on-year increase of 16.22%, a net profit of 235 million yuan, a year-on-year decrease of 35.78%, and a net profit of 179 million yuan, a year-on-year decrease of 46.86%. This is also the second consecutive year that the company has increased revenue but not profit.
In terms of quarters, in the fourth quarter of 2023, the peak season of alcohol consumption, Huazhi Liquor Store achieved revenue of 1.868 billion yuan, a year-on-year increase of 52.11%, but the net profit was only 0.04 billion yuan, a sharp decrease of 65.96% year-on-year, and the net profit margin was only 0.21%.
As the "first retail stock of liquor industry" listed on the A-share GEM, the development of Huazhi Liquor Store has always been very representative. However, in the past two years, the overall liquor consumption market has been under pressure, and with the continuous increase in direct sales channels and ex-factory prices by liquor companies such as Moutai, "the more you sell, the less you earn" seems to have become a problem faced by Huazhi Liquor Stores.
A reporter from the Yangtze River Business Daily noticed that from 2017 to 2021, the gross profit margin of Huazhi Liquor Store was around 20%. In the downward cycle of the industry, Huazhi Liquor began to have a hard time. In 2022, its gross profit margin plummeted to 14.03%, and in 2023, it will further decline by 3.28 percentage points year-on-year to 10.75%, which is only half of what it was in 2019.
As of the close of trading on April 25, the share price of Huazhi Liquor Store closed at 16.43 yuan per share, compared with the high of 35.4 yuan per share in 2023, and the company's share price has been "cut in half".
Inventory accounted for 46.26%
Recently, Huazhi Liquor Company released its 2023 financial report. According to the data, Huazhi Liquor Store will achieve a total revenue of more than 10 billion yuan for the first time in 2023, reaching 10.121 billion yuan, a year-on-year increase of 16.22%, however, the company's net profit will be 235 million yuan, a year-on-year decrease of 35.78% - although the scale of revenue has expanded, the profitability of Huazhi Liquor Store has not been improved accordingly.
In terms of asset composition, in 2023, the inventory of Huazhi Liquor Store will reach 3.355 billion yuan, a decrease of 2.16% over the same period last year, but the proportion of inventory in total assets will increase from 40.63% in 2022 to 46.26% last year.
In 2023, the company's liquor business increased by 20.02% year-on-year to 9.395 billion yuan, accounting for 92.83% of the total revenue, while wine and imported spirits reached 487 million yuan and 143 million yuan, respectively, down 19.86% and 4.42% year-on-year. From the perspective of gross profit margin, the gross profit margin of liquor was 9.24%, down 3.73 percentage points from the same period last year.
The Yangtze River Business Daily reporter learned that China Resources Liquor has established long-term and stable cooperative relations with well-known upstream wine companies, and its business covers the procurement, sales and brand promotion of alcohol products.
However, in fiscal year 2023, the decline in the company's net profit was already evident in the third quarter. Although the single-quarter revenue and net profit increased in the third quarter, the net profit in the first three quarters still decreased by 34.69% year-on-year.
In the long run, in the past two years, the performance growth rate of Huazhi Liquor Store has slowed down significantly. From 2020 to 2022, the revenue growth rate of Huazhi Liquor Store was not stable, with 32.2%, 50.97% and 16.73% respectively. In 2022, the company will achieve revenue of 8.71 billion yuan, and its net profit will be nearly halved, down 45.77% year-on-year to 370 million yuan.
In this regard, some industry analysts said that due to the impact of the macroeconomy, the consumer market continues to recover, but the competition in the terminal market is becoming more and more intense. Against this backdrop, Huazhi Liquor Store is facing challenges such as high inventory and inverted prices, which seriously challenges distribution profits.
It is reported that when Huazhi Liquor Store was listed in 2018, its prospectus showed that from 2016 to the first half of 2018, the Moutai series and Wuliangye series products contributed more than eighty percent of the revenue to Huazhi Liquor Store. More than half of the 53 degrees Feitian Moutai and 52 degrees Pu Wu products sold are directly purchased from wine companies, and the rest are purchased through suppliers.
After the listing, Huazhi Liquor Store will no longer separately announce the proportion of revenue related to Moutai and Wuliangye series liquors. However, in April 2021, Wu Xiangdong, chairman of Huazhi Liquor Company, said at the performance briefing that the company's "'Maowu' and other famous wines still account for 70% of the revenue".
However, since November last year, the ex-factory prices of Feitian Moutai and Wuliangye have increased one after another, while the terminal prices of Moutai and Wuliangye have not increased significantly, resulting in pressure on the profits of Huazhi Liquor Store.
However, what is even more a headache for Huazhi Liquor is that Moutai is transforming to direct sales. Moutai's 2023 financial report shows that last year, Kweichow Moutai's direct sales revenue was 67.233 billion yuan, a year-on-year increase of 36.16%, and the wholesale channel revenue was 79.986 billion yuan in the same period, a year-on-year increase of 7.52%.
It can be seen that the operating income of Kweichow Moutai's direct sales channel is rapidly catching up with the wholesale agency channel, which shows that the direct sales track has become the strategic focus of Moutai.
Not only that, Wuliangye, Luzhou Laojiao and other leading wine companies are also laying out direct sales tracks, and the proportion of direct sales revenue is rising. Huazhi Liquor Store wants to hold the thighs of famous wine, I am afraid it will only become more and more difficult. Some analysts believe that it is the head wine companies turning to direct sales that has depressed the profits of alcohol distributors.
The fine wine business was under pressure, and the gross profit margin fell for two consecutive years
According to public information, Huazhi Liquor Store was established in 2005 and claimed to be "one of the leading boutique liquor marketing and service providers in China", and won the agency rights of Wuliangye Group's vintage liquor and Kweichow Moutai in 2006 and 2009 respectively, and fully opened online and offline circulation channels.
It is precisely because it was the first to win the agency rights of the leading liquor companies that the development of Huazhi Liquor Store has been opened. In 2019, Huazhi Liquor Store was officially listed on the Shenzhen Stock Exchange, becoming the "first stock of liquor circulation". Up to now, Huazhi Liquor Store has more than 2,000 chain stores and more than 30,000 high-quality retail terminals across the country.
However, a reporter from the Yangtze River Business Daily noticed that Huazhi Liquor Store is now much worse than before in terms of earning power. According to the financial report, in 2023, the gross profit margin of Huazhi Liquor Store will decline by 3.28 percentage points year-on-year to 10.75%, and the net profit margin will decline to 2.39%.
In fact, the gross profit margin of Huazhi Liquor Store has not been very high in recent years. According to the inventory of the reporter of the Yangtze River Business Daily, from 2018 to 2022, the gross profit margin of Huazhi Liquor Store was 21.36%, 21.39%, 19.07%, 20.96% and 14.03%, and the net profit margin was 8.36%, 8.59%, 7.69%, 9.22% and 4.29% respectively.
In terms of regions, in 2023, in addition to a slight increase in the gross profit margin in North China, Huazhi Liquor Store will also experience a decline in gross profit margin in East China, South China, Central China, and e-commerce, among which the gross profit margin of the e-commerce sector and South China will be the lowest, only 6.86% and 5%, which is far lower than the average gross profit level of the company.
Regarding the decline in gross profit margin, the company's management also explained at the 2023 performance briefing: the price of most products in the liquor market is under pressure, and the company has taken the initiative to adjust the product structure in order to comply with market demand, and the proportion of sales of famous liquor has increased year-on-year;
The more you sell, the less you earn. This has also made Huazhi Liquor Store pay more and more attention to the more profitable boutique wine business, and the company has always claimed to strive to become a boutique wine marketing and service provider with international influence.
However, the latest financial report shows that in the context of weak consumption, the fine wine business that Huazhi Liquor Company attaches importance to is under pressure. In 2023, Huazhi Fine Liquor Trading Co., Ltd., a subsidiary of Huazhi Liquor Co., Ltd., which is responsible for the sales of fine liquor, will achieve revenue of 1.556 billion yuan, a year-on-year decrease of 58.4%, and a net profit of 109 million yuan, a year-on-year decrease of 26.97%.
It is reported that lotus wine is one of the core fine wines sold by Huazhi Liquor Store. Lotus Liquor is a tripartite cooperation between Huazhi Liquor Co., Ltd., Hebei China Tobacco and Moutai Town Hehua Liquor Co., Ltd., and is promoted and operated by Lotus Data Technology Co., Ltd., a joint venture subsidiary of Huazhi Liquor Holdings. Last year, Lotus Data Technology Co., Ltd. achieved revenue of 247 million yuan, down 41.49% year-on-year, and net profit of 19.77 million yuan, down 31.45% year-on-year.
Previously, Huazhi Liquor Company had expected that in 2023, Lotus Liquor would reach a volume of more than 1 billion yuan, and the growth rate would double. Today, that goal has not been achieved.
For the strategic plan for 2024, Wu Xiangdong said that he will seize the opportunity to expand the omni-channel sales network, and at the same time, accelerate digital transformation, actively develop new media channels, and realize personalized, accurate and fast response to the needs of users in all scenarios.