Why does Wuliangye go against the industry?

Since the second half of 2021, the growth rate of Wuliangye’s performance has begun to slow down. In the face of the growth rate of many liquor companies as high as 20%-30% (some even more than 50%), the growth rate of its net profit attributable to the parent in 2021 is only 17.15%. , the growth rate of the first quarterly report in 2022 is only 16.08%, which is significantly behind its peers.

In response to the current situation of Wuliangye, some investors have raised several questions:

1. Are the products of Wuliangye not selling?

In 2021, Wuliangye’s operating income is 66.209 billion, of which the sales of Wuliangye products are 49.11 billion, the production volume is 28,408 tons, and the sales volume is 29,203 tons; the sales volume of series wine is 12.62 billion, the production volume is 160,309 tons, and the sales volume is 152,572 tons.

In general, Wuliangye products are in short supply, and the series of wines are not as strong as Wuliangye products, but the difference between production and sales is less than 5%. Wuliangye’s supply and demand relationship is not a problem, and it is in a healthy mode.

2. Has the production capacity of Wuliangye encountered a bottleneck?

Judging from the production capacity of the winery itself, the expansion in the early 1990s has reached 30 years of cellar age, and the rate of famous wines will be significantly improved. After continuous research and development, the current new production capacity can produce Wuliangye within 3 years, which is an effective guarantee for Wuliangye’s production capacity. By the end of the 14th Five-Year Plan period (2025), on the basis of the existing 100,000 tons of production capacity, 100,000 tons of original wine production capacity will continue to be added, and the total production capacity can reach 200,000 tons. In other words, by 2025, the overall production capacity of Wuliangye will double from 2021, providing sufficient hardware support for the long-term sustainable growth of the winery.

3. Has Wuliangye been impacted by competing products?

Since Maotai was launched in 1935, many people have said that it will directly affect the sales of Wuliangye. From the superficial data, the hot sale of Moutai 1935 does overlap with the slowdown of Wuliangye’s performance growth. However, at present, the output of Moutai 1935 is obviously insufficient, with only a few thousand tons in supply, and the terminal price remains at around 1,500 yuan, which is significantly higher. The price of Badai Puwu will not put too much negative pressure on Wuliangye’s sales.

The reason why Wuliangye’s performance growth rate lags behind the major wine companies in the industry is the company itself. In the past year, Wuliangye has been controlling shipments. Many distributors have insufficient supply of goods. Not only have manufacturers not given terminals more tasks, they are still using higher-than-ex-factory prices for channels with operating difficulties. price for recycling.

Moreover, taking into account the overall situation of the current market, Wuliangye allows dealers to use commercial bills to pay for goods, which is reflected in the statement, which greatly reduces contract liabilities, while bills receivable reached 22.359 billion.

These measures are basically not implemented in other larger wine companies. Each company is busy raising prices and continuously increasing contract liabilities to make their financial reports better. The reason why Wuliangye goes against the industry is directly related to its channel operation and the release of production capacity in the next few years.

From the perspective of product classification, in Wuliangye’s total operating income, the sales of Wuliangye products accounted for 74.18%, and the gross profit margin was 85.59%. The future growth trend of Wuliangye depends not only on the growth rate of Wuliangye’s product output, but also on the steady increase in gross profit margin.

Among the current listed liquor companies, in high-end liquor, Wuliangye has the least profit left for the channel. After raising the single bottle price of the unplanned quota to 1089 yuan this year, the comprehensive ex-factory price of Wuliangye has reached 969 yuan, and the batch price of the channel is basically around 970-980 yuan. If you want to make money, you can only count on the rewards at the end of the year. .

Since last year, various liquor companies have raised prices one after another, which directly contributed to the sharp rise in performance. The two major leaders, Maotai and Wuliangye, both made smaller moves. Moutai can only raise prices through the Feitian Curve of the small wine version of the iMoutai platform, and as the company with the largest liquor production capacity, Wuliangye is obviously under more pressure after raising prices.

However, in the face of the production capacity that will double in 4 years, if the channel can only earn the price difference of 10 or 20 yuan, it will be difficult for Wuliangye to guarantee the current gross profit margin level in a few years. Although the recent control of goods and prices has achieved initial results, due to the constraints of the overall consumption environment, more efforts are still needed to really push the terminal price of the eighth-generation ordinary five to the market guide price of 1499.

Judging from the batch price and channel terminal price this year, Wuliangye has been ensuring the terminal price by controlling the quantity. Even during the 618 promotion period, the online retail price can still be guaranteed to be above 1,000 yuan (not counting individual wine merchants who use low-priced wine to guide traffic), and the batch price of the Eighth Generation Puwu is also maintained at 970 yuan. In the context of the severe slump in catering consumption in the third quarter, this price is also a good performance. With the recovery of the catering market in various places, the price of Wuliangye is expected to further increase in the second half of the year.

From the perspective of changing the psychological expectations of consumers, the listing of Maotai 1935 and even the price increase of Guojiao 1573 are good things for Wuliangye. Although various wine companies have launched high-end products, the number is small and the brand power is limited. The price of 1,000 yuan always relies on Wuliangye to fight alone, and some are alone. If Maotai 1935, Guojiao 1573 and Eighth Generation Puwu can consolidate the price band of 1,000 yuan, it will not only ensure that Wuliangye’s goal of standing at a price of 1,000 yuan for several years can be achieved, but also can achieve the price band of 2,000 yuan for the classic Wuliangye station. There is a big boost.

It is important to look at the scenery. What Wuliangye is doing is fundamentally different from the behavior of many wine companies who are eager to increase prices and release high-end production capacity. Liquor is an industry that attaches great importance to brands. This brand is not only formed by history, but also needs to be maintained by wine companies through continuous operation and brewing.

For investors, when the growth rate of performance slows down, of course they will be more worried, but the most important thing is whether this slowness will bring about future fastness. This is the logic of long-term investment. For the leading liquor companies with top business models, it is worthwhile to pay more patience, keep watching. @Today’s topic $Wuliangye(SZ000858)$

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