Impression of the 2021 semi-annual report of Dong'e Ejiao: The dawn has just emerged

First, the main data

Revenue was 1.687 billion, up 1.095 billion year-on-year, an increase of 54.01%;

Net profit was 150 million, up -0.8402 billion, an increase of 278.10.%;

Deduct non-net profit of 101 million, -105 million year-on-year, an increase of 202.59%;

Net cash flow from operating activities was RMB2.033 billion, up 463.98% year-on-year to RMB360 million;

The above net increase is attributable to the impact of "an increase in cash received from sales and a decrease in cash paid for purchases" for the period.

Total assets of 12.256 billion, an increase of 2.80% year-on-year to 10.950 billion;

Net assets were 9.683 billion, up from 9.731 billion, an increase of -0.5%.

Comments: A substantial increase in revenue and a substantial increase in net cash flow are the biggest highlights.

Revenue Composition:

The pharmaceutical industry was 1.572 billion, accounting for 93.17%, an increase of 79.11%;

Donkey breeding and trade 0.8091 billion, accounting for 4.80%, an increase of -56.54%;

Other 0.3421 billion, accounting for 2.03%, an increase of 8.43%;

thereinto:

Ejiao and series products revenue of 1.453 billion yuan, accounting for 86.14%, an increase of 87.03%;

The gross profit margin of ejiao and series products was 63.28%, an increase of 4.98% year-on-year.

Regional Income Composition:

East China 840 million, accounting for 49.78%, an increase of 11.11%;

South China 206 million, accounting for 12.19%, an increase of 2448.80%;

Southwest 172 million, accounting for 10.17%, an increase of 278.80%;

173 million in North China, accounting for 10.29%, an increase of -5.18%;

Central China was 177 million, accounting for 10.47%, an increase of 1272.58%.

In East China, which accounts for almost half of the country, income has grown steadily, and growth in South China, Southwest China, and Central China has recovered rapidly.

The comprehensive gross profit margin was 59.52%, an increase of 13.49 percentage points year-on-year to 46.03% year-on-year;

Net profit margin of 8.87%, year-on-year -7.78%, from negative to positive.

14 years, 15 years normal years:

Gross profit margin of 65.54% and net profit margin of 34.23% in 2014;

Gross profit margin of 64.61% and net profit margin of 34.23% in 2015.

Compared with 14 years and 15 years, there is a big gap in net profit margins, but it is picking up.

Key financial figures changes:

1. Operating income (see above) increased by 54.01%, which is "the recovery of sales growth of ejiao and series products, driving revenue to increase year-on-year";

2. Sales expenses of 545 million, an increase of 74.72% year-on-year, is "to promote the recovery of market growth, terminal expenses, brand communication investment increased";

Comments: The sales expense ratio was 32.31%, an increase of 3.82 percentage points year-on-year to 28.49%. The company increased its marketing efforts, which is a good thing in the company's difficult transformation period, and also highlights the strength of the management. Health care consumer brands, it is very necessary to maintain a certain sales expense ratio.

3. The net cash flow from operating activities increased by 463.98% (see above), which is "the impact of the increase in cash received from sales and the decrease in cash paid for purchases in the current period";

4. The cash received from the sale of goods and the provision of labor services was 2.919 billion yuan, an increase of 89.24% year-on-year to 1.543 billion yuan, which was "the increase in sales proceeds in the current period and the collection of banker's acceptance bills due";

Cash was received at $2.919 billion and revenue was $1.687 billion, $1.232 billion more than revenue for the period.

5, the purchase of goods, accept labor payment cash 222 million, year-on-year 584 million, a decrease of -61.95%, the report explains: "mainly in the same period to pay suppliers for goods, donkey procurement funds are relatively large";

6. Net cash flow from investment activities - 748 million, -342 million, an increase of -118.34%, for "the purchase of cash in the current period increased";

Comments: The company has never been bad money, although in difficulty, there is still a large share of financial funds.

7. The net increase in cash and cash equivalents was 1.273 billion, -112 million year-on-year, an increase of 1237.69%, which was "the impact of the increase in cash received from sales in the current period".

Accounting data is the most concise language, from the above data changes, the company's basic aspects continue to develop for the good, the overall impression is:

Sales revenue increased significantly, net operating cash flow increased significantly, sales expenses increased significantly (which was also the reason for the increase in revenue and no increase in profits), and the company transformed to an asset-light model.

The company's assets have always been very hard, and although it is in trouble, it is still not bad for financial money.

Composition of major assets (proportion of total assets):

1. Monetary funds are 2.725 billion, accounting for 24.21%, an increase of 1.273 billion, or 87.67%, compared with 1.452 billion at the beginning of the period;

2. Trading financial assets were 2.216 billion, accounting for 19.69%, an increase of 780 million, or 54.32%, compared with 1.436 billion at the beginning of the period. This was mainly due to the increase in wealth management products.

The above two items total 4.941 billion, can be regarded as cash assets, accounting for 43.90% of the total assets, in other words, more than 40% of the company's total assets are cash assets, which shows the "hardness" of the company's assets!

3. Accounts receivable of 418 million, accounting for 3.71%, compared with 469 million at the beginning of the period, a decrease of 0.51 billion;

4. Inventory of 2.029 billion, accounting for 18.03%, compared with 2.478 billion at the beginning of the period, a decrease of 449 million;

5. Contract liabilities of 272 million, compared with 299 million at the beginning of the period, a decrease of 0.27 billion;

6. Receivables financing was 626 million, accounting for 5.56%, a decrease of 1.182 billion from 1.808 billion at the beginning of the period, which was "the maturity collection of banker's acceptance bills received from the previous sales".

Individual Shareholders:

Careful investors should find that when the first quarter report of 2021 was disclosed, there was a natural person shareholder Zhang Xian among the top ten shareholders, holding 7255733 shares, accounting for 1.11% of the total share capital;

As of the semi-annual report, Zhang Xian held 7837533 shares, accounting for 1.20% of the total share capital, indicating that he increased his holdings by 581,800 shares in the second quarter.

Based on the closing price of 34.01 yuan on August 25, the market value of holdings is 267 million.

The semi-annual report disclosed that Zhang Xian increased his holdings of 2637302 shares during the reporting period, indicating that Zhang Xian had held 5200231 shares before December 31, 2020, and had not entered the top ten shareholders due to the small number of shares he held.

Who is Zhang Xian? I don't know, but like Wang Fuji, who has always been concerned about the film, I have always been very cold to individual shareholders (for institutions, whether public or private, Chinese and foreign, I am not cold).

2. Business Overview

The company is mainly engaged in the research and development, production and sales of ejiao and ejiao series products, is the formulator of ejiao industry standards, is a Chinese tonic health leader and a model for the high-quality development of traditional Chinese medicine enterprises.

Main Products:

1. Ejiao, a valuable Chinese herbal medicine that has been passed down for nearly 3,000 years, the Shennong Materia Medica lists the tonic products, and the Compendium of Materia Medica calls it a blood tonic holy medicine, which won the National Quality Gold Award three times in 1980, 1985 and 1990, the Great Wall International Gold Award in 1991, and the National Quality Award in 2015. At present, Dong'e Ejiao has become the first major product of OTC and the first brand of nourishing health.

2. Compound ejiao pulp, derived from the Ming Dynasty qi and blood double supplement first party "Jingyue Quanshu" "two instrument cream", inherited for 400 years, the exclusive variety of traditional Chinese medicine, nourishing the heart, replenishing the heart, reassuring the spirit, helping sleep, no sucrose, no additives, 41 years of quality assurance.

3, "Peach Blossom Ji" ejiao cake, preferably authentic raw materials, product packaging using Chinese style design, more suitable for high-end women and people with gift needs, through food supplements, from the inside out to glow beautiful face.

4. "True Face" brand series products, combined with the function of ejiao beauty care, aim at the female beauty market, and practice the health concept of "internal and external repair". At present, there are products such as zhenyan small molecule ejiao.

5. East Ejiao brand "Ejiao Powder", which lasted 15 years to achieve major breakthroughs in process technology, three iterations of upgrading, and was listed heavily in 2020. Ready-to-drink, convenient and fashionable, expand diversified consumption scenarios, and lay a solid foundation for creating a young population.

6. More than 40 kinds of other strategic reserve products.

The above is the company's semi-annual report on the product line of the combing, from which you can clearly see the product positioning, and the description is quite concise, clear and powerful.

When introducing the "efficacy benefits", it is described like this:

The two major products of Dong'e Ejiao and compound Ejiao pulp ranked among the top three supplementary products in the 2018 and 2019 "Scientific and Technological Competitiveness Reports on Large Varieties of Chinese Medicines" released by the Chinese Association of Traditional Chinese Medicine. Based on the study of gene transcriptomics and proteomics, the mechanism of action of East Ejiao in the treatment of thalassemia was discovered, and clinical studies also confirmed the efficacy of East Ejiao in improving blood picture indicators and improving the symptoms of blood deficiency in Traditional Chinese Medicine, which is a milestone achievement in the study of the core efficacy of Ejiao; in the study of lung mechanism, the protein regulation and metabolism pathway of Dong Ejiao to enhance lung function was found for the first time, which explained the "lung-running" effect of Ejiao; based on the new technology of animal in vivo dynamic imaging, it was found that Dong Ejiao can increase the collagen content of the skin This provides new intuitive scientific evidence for the efficacy of beauty and beauty.

The above description highlights the company's product confidence and cultural self-confidence.

Third, a few points of reflection

1. The company's fundamentals have further improved, which is highlighted by the increase in sales expenses, a substantial increase in sales revenue, an increase in payment collection, and a significant increase in net cash flow. Although the increase in revenue does not increase profits, from the perspective of the improvement of these aspects, the strategic planning and execution of the new management are still worthy of recognition.

2, the company's previous information is that the channel to inventory into a benign cycle, from the data changes, should be confirmed. The "sequelae" left by Qin Yufeng's predecessor, such as channel pressure, credit relaxation, and bad debts caused by the increase in a large number of receivables, are expected to be further dealt with.

3. Although "ejiao black" has always existed (especially in the stock market), it is undeniable that ejiao and its series of products still have a certain "just need" (although it is very niche), and the mental placeholder of East Ejiao as the first brand of ejiao has not changed fundamentally in the minds of consumers. What is a moat for a company? I think that's it.

The company has always grasped the quality of products, which is also one of the cornerstones of its future realization of the reversal of the dilemma, which can also be regarded as the cultural heritage left by Qin Yufeng (on people and things, it can not be killed with a stick).

After the new management led by Gao Dengfeng took office, more attention was paid to customer experience, more research was made on the psychological needs of consumers, especially the psychology of young consumers, and then increased marketing including digital marketing and online marketing.

I have said before, "Those who win the hearts of the people win the world", as a company, those who win the hearts and minds of consumers (target customers) also win the world. This is an indisputable truth. It is hoped that the new management, with a clearer positioning of the product cluster, will target customers in targeted marketing, which is the hope of "winning the world" in the future.

Here is a brief example, for example, relying only on the compound ejiao pulp, if clearly positioned to treat insomnia this "selling point" (according to some consumers and investors experience, in this aspect of the product is still effective, of course, may not be all effective for everyone, of course, corporate advertising can not be so publicly advertised efficacy), I think it is possible to achieve annual sales of billions of yuan in the future (modern people many people have sleep disorders, as for hundreds of millions of shareholders I estimate that there are more so, hehe), of course, This is just my opinion as a bystander, and it also needs to be vigorously developed by management.

In addition, everyone who loves beauty has it. Although from the perspective of conforming to human nature, more modern women hope that "needle medicine" will soon have a beauty effect, and eating ejiao tonic beauty is a bit contrary to human nature, but after all, the pursuit of beauty is "incurable" for many modern women, so the "selling point" of tonic beauty should also have a large market. Of course, it also needs to be vigorously developed by management.

4, the first two years of The first two years of The ejiao financial "explosion", the reason why this account has not been abandoned (in recent years, the use of the stock price downturn to increase the position of 2900 shares, although did not buy the lowest price), mainly considering that its assets are still relatively "hard" (sufficient cash assets, no short-term long-term liabilities), the brand mind occupation is still there, and has the characteristics of sustainable operation, the new management as long as the next "scraping bone to cure the poison" work, there is hope to achieve the dream of changing back from "frog" back to "prince".

Of course, this time is indeed a bit long, but no matter what you do, you need to accumulate slowly, where is the good thing of "one step to the sky"? What's more, to do business, we must face the complex competitive environment and industry ecology, and realize the reversal of the dilemma, which requires step-by-step and down-to-earth work. Of course, from the current point of view, the dawn has just emerged, and I hope that the future Ejiao will not live up to me!

5. As of today, the market value of East Ejiao is 22.2 billion, which probably includes the expectation of achieving a net profit of about 1 billion yuan in the future.

I said before, from the business model, East Ejiao is still a bit hard, that is, a bit of "two ends of gas", the upstream from the long-term raw materials are limited, the downstream terminal if the pricing is too high, and it is easy to lose consumers. How to grasp this balance point is obviously testing the wisdom of the new management.

So, in this case, can Gordon Peak climb to the "top of The Jade Peak" in the future (that is, to achieve an annual net profit of 1.5-2 billion yuan in the future)? You can only watch as you walk.

6. When analyzing the film, I said that individual investors should be good at learning from excellent individual investors. There is a Wang Fuji in Katazai, 12 years, from 250 million to 9.374 billion (as of August 20, the closing market value), and now East Ejiao has come out with a Zhang string, obviously, this natural person shareholder is in the East Ejiao stock price downturn period continues to buy, the future of this Zhang String is also a model for individual investors to learn? You also need to look at it as you walk.

Note: The above represents only personal views and does not constitute investment advice, remember! Remember!