original release | Golden Horn Finance (id: f-jinjiao)
author | chong lei, cfa picture
"my country's dairy industry is facing the biggest challenge since 2008."
at the 15th Dairy Industry Conference held recently Yu Kangzhen, counselor of the State Council and former vice minister of the Ministry of Agriculture and Rural Affairs, spoke out. Li Shengli, vice president of the China Dairy Association, shared a set of research data saying that the surplus of raw milk will exceed 2 million tons in 2023, and the industry will suffer losses of more than 80%.
When the nest is covered, there are no eggs left. Even New Hope Dairy (securities abbreviated as " New Dairy "), which has maintained double-digit growth in revenue and net profit for five consecutive years, has failed to achieve its growth targets, and its asset-liability ratio ranks first in the A-share dairy industry.
Li Shengli suggested that the dairy industry can learn from the pig industry to reduce overcapacity, and New Hope Dairy was born out of New Hope , which is the leading pig raising enterprise.
What’s more interesting is that New Hope Dairy recently elected Li Wei as a non-independent director of the third board of directors and a member of the strategy and development committee of the board of directors. Li Wei, 72, is the spouse of Liu Yonghao, the former richest man in China and chairman of New Hope Group, and later The investor is also the joint actual controller of New Hope Dairy.
When Li Wei came to the stage, he was undoubtedly sending a signal to the outside world. Faced with industry difficulties and high debts, the Liu Yonghao family standing behind them really couldn't sit still.
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, not reaching the target
In 2023, due to the continuous decline in raw milk prices and high feed costs, domestic dairy companies generally face difficulties of varying degrees.
Information released by the Ministry of Agriculture and Rural Affairs shows that the average price of raw milk in 10 major producing provinces including Inner Mongolia and Hebei has dropped from a high of 4.38 yuan/kg in late 2021 to 3.63 yuan/kg in February 2024.
The chill is transmitted to the performance of listed companies. Choice data shows that among the 20 listed companies in Shenwan's tertiary industry-dairy, 7 reported a decline in net profit attributable to parent companies last year; 8 saw a decline in non-net profit, accounting for nearly half.
As a tens of billions-level enterprise, New Hope Dairy’s report card is remarkable.
In 2023, New Hope Dairy will achieve operating income of 10.987 billion yuan, an increase of 9.80% from 10.006 billion yuan in 2022; net profit attributable to the parent company will be 431 million yuan, an increase of 19.27% from 361 million yuan in 2022; net profit after non-deductible It was 465 million yuan, a year-on-year increase of 57.86%. Since the launch of
, New Hope Dairy has maintained double growth in revenue and net profit for the fifth consecutive year.
However, New Hope Dairy, which increased both revenue and net profit, did not achieve the previously set goals.
In 2020, New Hope Dairy's operating income and net profit were 6.749 billion yuan and 271 million yuan respectively. The company proposed at that time that the combined operating income and net profit growth rates by 2023 would be no less than 95% compared with 2020. Based on this calculation, the revenue and net profit targets of New Hope Dairy in 2023 are 13.161 billion yuan and 528 million yuan respectively.
But obviously, New Hope Dairy’s performance in 2023 failed to meet the above goals. Xi Gang, chairman of New Hope Dairy, also bluntly said at the 2024 Investor Conference: "In fact, last year's performance growth was far from enough for us, but relatively speaking it was okay." The main reason why
's growth was less than expected was that the business model.
The core product of New Hope Dairy is pasteurized fresh milk. By deeply exploring the organic fresh milk market and gradually radiating into the fields of flavored milk and normal temperature milk, it can not only quickly seize the market in the short term relying on product highlights, but also avoid directly selling normal temperature milk. The track is closely connected with the two major dairy companies, Yili and Mengniu.
However, because "fresh organic milk" has more stringent requirements for raw materials, warehousing, and logistics, New Hope Dairy's operating costs are also very significant. During the reporting period, the company's operating costs for liquid milk and dairy products manufacturing were as high as 7.003 billion yuan, a year-on-year increase of 7.08%, and transportation costs alone cost 727 million yuan. The high cost of
compresses the profit margin. From 2021 to 2023, New Hope Dairy's net profit margin is less than 4%; in 2021 and 2022, it is not even comparable to the industry median.
New Hope Dairy has judged that the downward cycle of this wave of raw milk will be relatively long. Xi Gang said that "the important thing is to maintain strategic focus and perform better than peers when the industry is at a trough." He hopes to speed up the recovery of downstream consumption through policy guidance.
Apart from getting through it, New Hope Dairy has no other options.
. Number one in debt ratio
If New Hope Dairy wants to survive the cycle, the bigger challenge lies in its high debt, which has been an old problem for many years.
As early as 2015-2017, New Hope Dairy was far from as large as it is today. Its revenue was less than 5 billion yuan, its net profit was less than 300 million yuan, and its asset-liability ratio had reached about 70%.
At that time, New Hope Dairy explained that the company's financing channels were relatively simple compared to ordinary listed companies. The asset and liability structure had more short-term borrowings from New Hope Finance Co., Ltd. and banks and other payables, resulting in a higher proportion of liabilities. After
went public, New Hope Dairy's high debt ratio did not change much. From 2019 to 2023, the company's asset-liability ratio has been rising and exceeded 70%. Especially starting from 2021, New Hope Dairy's asset-liability ratio has ranked first in the industry for three consecutive years.
Maintaining a high debt ratio for a long time may be related to New Hope Dairy’s expansion strategy. As a regional dairy company, New Hope Dairy hopes to expand nationwide through "buy, buy, buy" mergers and acquisitions.
"At the product level, New Hope Dairy will strategically integrate resources to meet different needs." Xi Gang once mentioned that in order to accelerate development, New Hope continues to acquire companies and needs to continuously increase financing.
"Funds are good leverage, so the increase in leverage and liabilities is also an increase in leverage, which is actually boosting our rapid development. I think that if the debt is slightly higher, there is actually no problem, and the corporate risks are controllable. Yes." Xi Gang said.
Looking back, the development history of New Hope Dairy is a history of vigorous mergers and acquisitions. After New Hope Group decided to split its business and enter the dairy industry independently, it formulated an expansion strategy of "acquisition, integration (brands, resources), linkage, national (market), top three", and then through holding or equity participation It acquired dairy companies such as Hangzhou Shuangfeng and Hebei Tianxiang, laying the foundation for national operations.
From 2019 to January 2021, New Hope Dairy has invested more than 3 billion yuan in total, and has successively settled in Modern Dairy, Fuzhou Aoniu, Ningxia Huanmei, Comprehensive Dairy, and Xinao Dairy in the form of acquisitions, strategic investments, etc. and many dairy companies, and has completed its layout in many regional markets such as Northwest, Central China, and East China.
Currently, New Hope Dairy owns 66 holding subsidiaries, 15 major dairy brands, 16 dairy processing plants, and 13 self-owned ranches.
But problems also arise. On the one hand, its own asset-liability ratio is high; on the other hand, it has large subsidiaries with extensive branches, which makes New Hope Dairy face the problem of production capacity management and control.
According to the financial report, the actual production capacity of 16 subsidiaries in 2023 is 1.1806 million tons, which is only 76.24% of the designed production capacity of 1.5485 million tons. Only 6 subsidiaries have met the design capacity requirements.
With high debt, New Hope Dairy began to change its strategic focus. In May 2023, New Hope Dairy released a new five-year strategic plan, saying that it will adhere to "endogenous growth as the mainstay, supplemented by mergers and acquisitions." Xi Gang said at the meeting that the company plans to promote double-digit compound annual growth in scale and reduce the debt ratio by 10 percentage points.
, release signal
New Hope Dairy dares to slowly shift its strategic focus from "buy, buy, buy" to "endogenous growth", mainly because under the long-term layout, the low-temperature business with more growth momentum already has certain advantages.
In 2022, the national market share of New Hope Dairy's low-temperature products will exceed 10%. The low-temperature business is a recognized high-growth area in the industry. Authoritative organizations predict that the compound growth rate of low-temperature milk will reach 10.5% in the next three years, which is much higher than the 4.9% of normal-temperature milk. Although the prospects of
are good, the rapid growth of the industry has hit the macro wall of consumption downgrade.
The official sales channel of New Hope Dairy shows: "24-hour fresh milk" is priced at 5.5 yuan/190ml, "24-hour golden nutritional milk" is priced at 6.5 yuan/200ml, "24-hour platinum high-quality milk" is priced at 7.5 yuan/200ml, " "24-hour limited edition "Juanshan Milk" is priced at 9.9 yuan/200ml.
These prices are not even used for horizontal comparison. Just common sense in life can realize that they are not cheap. However, the signal presented by the consumer market is a different story - cost-effectiveness is becoming increasingly important.
The historically expensive infant milk powder market is also seeing price cuts.
Feihe's financial report shows that revenue in the second half of 2023 was 9.8 billion yuan, a year-on-year decrease of 15.8%; net profit attributable to the parent company was 1.69 billion yuan, a year-on-year decrease of 36.9%. The main reason is the product price reduction caused by the pressure of industry price war.
Aoyou ’s financial report also shows that increasing the discount promotion of Kabriate’s “Youzhuang” brand is the main reason for the year-on-year decline in gross profit margin.
Under the trend of large-scale pursuit of cost-effectiveness in the industry, New Hope Dairy has set a product price of up to 9.9 yuan/200ml. It is hard to say whether it can carve out a way out.
Cost-effectiveness is becoming more and more important. At the same time, competition in the low-temperature business has become fierce. With the upgrade of low-temperature freezing technology and the improvement of domestic logistics efficiency, the "freshness advantage" maintained by New Hope Dairy is constantly being threatened by large national dairy companies.
According to Euromonitor data, the top three low-temperature milk companies in China in 2022 are Bright Dairy , Mengniu Dairy and New Hope Dairy. Although the market share of New Hope Dairy is not far behind that of the second-ranked Mengniu Dairy, , but it is only one-half of Bright Dairy’s market share.
In fact, the low-temperature milk industry has already gone through the category education period, and there are currently many giants in the market. However, compared with large-scale national dairy companies, New Hope Dairy has always had a difference in popularity, especially on the basis of high pricing. The advantages it has established may not be strong.
In addition, New Hope Dairy also encountered regulatory penalties. On April 19, a penalty notice from the Finance Bureau of Linquan County, Fuyang City, Anhui Province revealed that the local rural compulsory education student nutrition improvement plan was subcontracted at various levels. The involved Anhui New Hope Baidi Dairy Co., Ltd. is a wholly-owned subsidiary of New Hope Dairy. It was eventually fined 191,086 yuan by the Linquan County Finance Bureau and its illegal income of 100,000 yuan was confiscated.
Various dangerous situations may be the direct reason why 72-year-old Liu Yonghao’s wife Li Wei came to the front desk. Since March this year, Li Wei has changed his low-key style in the past and been appointed as the non-executive director of New Hope Service . He has frequently visited New Hope Service’s projects under management in various places; only 3 months later, Li Wei was elected as New Hope Dairy of non-independent directors, the signal sent could not be more obvious. Whether
can push the low-temperature business to a new level in a market where competition is becoming increasingly fierce and cost-effectiveness reigns supreme, thereby breaking through the dilemma of low net profit and high debt, may be the biggest problem that Li Wei needs to face after joining the board of directors, and it will also become the outside world A window to observe the trends of Liu Yonghao’s family.
Reference material:
Entrepreneurship Frontier "The pace of "buy, buy, buy" has slowed down, and New Hope Dairy is moving towards low-temperature milk"
Beido Finance "New Hope Dairy's performance is not up to standard: massive mergers and acquisitions are heavily indebted, and Xi Gang is under great pressure"
Dairy Industry The Times "New Hope Dairy, "Gamble" to upgrade consumption"
Donghai Securities "New Hope Dairy (002946): The time is right for the "Fresh Strategy" to win, and we will build on the past and create a new chapter"
