Depth independent penetration
Irresistible sweets Let the "bullet" fly a little longer Author: Li Huan.
Editor: Mondo.
Style: Ling Yu.
*: Shoucai - Shoutiao Institute of Finance and Economics.
Listing is just the beginning of the value marathon.
Tea tasting has always been respected as an elegant event. Like liquor, tea has a thousand-year-old heritage and a huge number of fans. However, compared with the dominance of liquor companies in the capital circle, few giants of tea companies are born.
On December 22, 2023, Lancang Ancient Tea landed on the Hong Kong Stock Exchange, with the halo of "the first share of Pu'er tea" on its head, which can be described as a great joy for the industry and carries countless confidences.
However, on the day of listing, Lancang ancient tea fell below 10HK$7 issue price, down 18692%。Fortunately, it rebounded in the next few days and returned to 10 on January 3, 20247 Hong Kong dollars, and then turned around and went down in the next three trading days, breaking continuously, closing at 10 as of January 8HK$18, with a market capitalization of less than 8HK$600 million.
Why did you get a cold reception?What is the market waiting for?
Net profit declined, and the main force of revenue generation declined
There are thousands of ways to say, the fundamentals are fixed stars.
According to the degree of fermentation and geographical indications, Chinese tea products can be broadly divided into seven categories, namely Pu'er tea, green tea, dark tea, black tea, oolong tea, white tea and yellow tea.
According to Frost & Sullivan, the market share of Lancang ancient tea will reach 6 in 20222%, which is the second largest Pu'er tea company in China. However, in terms of Pu'er tea revenue, the size of the Pu'er tea market only accounts for 5 percent of China's tea market2%。
From 2020 to 2022 and the first half of 2023, Lancang Ancient Tea's revenue will be 40.5 billion yuan, 55.9 billion yuan, 46.3 billion yuan, 23.2 billion yuan;Net profit 12.3 billion yuan, 12.9 billion yuan, 0$700 million and 0$2.4 billion.
It is not difficult to find that the growth of corporate performance is average, especially in 2022, the profit will decline, and the net profit in the first half of 2023 will be less than 30 million yuan. Gross profit margin also showed a downward trend, which was in the same period. 9% and 603%。
In this regard, Lancang Ancient Tea explained that mainly due to the large number of Pu'er raw tea products launched in 2021, the profit margin of such products is generally lower than that of Pu'er ripe tea products. The performance in 2022 changed face, mainly due to the repeated epidemic, which led to the interruption of store operations in the affected areas.
The consideration is that in the first half of 2023, the company's performance will still not improve significantly.
In-depth product structure, Lancang ancient tea is mainly Pu'er tea, but also includes black tea, white tea, and flavored tea. The company has formed three major product lines in 1966, Tea Mother and Rock Cold. Among them, "Tea Mother" is aimed at mass consumer groups, "Yanleng" is aimed at new middle-class consumers, and "1966" is mainly positioned as classic Pu'er tea, which is the company's main brand.
And since 2022, 1966 earnings have declined. The sales volume in 2022 will be 440 tons, which is 111 tons less than in 2021, corresponding to a revenue of 30.1 billion yuan, down 27 percent year-on-year19%；The sales volume in the first half of 2023 was 248 tons, a decrease of 33 tons from the same period in 2022, corresponding to revenue of 15.5 billion yuan, down 6 percent year-on-year45%。
The main brand is sluggish, which is naturally not good news. Why do you change your face?Is there any optimization and improvement in the product structure?
Inventory increase **Pros and cons
Looking back at the road to listing, Lancang Ancient Tea has submitted a listing application to A-shares and three listing applications to the Hong Kong Stock Exchange.
For example, standardization. In a sense, high-end tea, like high-end liquor, has a stronger social attribute than self-consumption. However, compared with the production standardization and transparency of the liquor industry, the non-standard attributes of tea are stronger.
From the perspective of the industry, non-standard attributes are also the main reasons for the pain points of the tea track, such as "there are categories but no brands" and unstable product quality. Generally speaking, when it comes to Pu'er, senior consumers first think of Yunnan, Fujian and other origins, rather than brands such as Lancang Ancient Tea and Taetea Pu'er.
Of course, this is not a family pain. However, for listed companies, if this stubborn disease is not broken, it is easy to affect the growth and value imagination of the enterprise.
From 2020 to 2022 and in the first half of 2023, the inventory amount on the books of Lancang Ancient Tea is 47 billion, 63.6 billion, 78.4 billion, 83.5 billion, accounting for the total value of current assets. 8%, which continues to be high and growing.
During the same period, the inventory turnover days were 1,345, 1,061, 1,641 and 1,588. In other words, it takes about 4 years for an inventory to turn over at a time.
Guo Xing, an industry analyst, said that this is related to the storage attributes of Pu'er tea. But even then, there must be a reasonable limit. Taking the liquor industry as an example, it is also resistant to storage, but the rapid progress in the past few years has caused many liquor companies to accumulate fat bubbles, so that their performance is thundering, and they are still experiencing the pain of destocking, which is what Lancang Ancient Tea needs to be vigilant about.
According to the 21st Century Business Herald, in 2022, there will be 127 Pu'er tea products in 1966, with a suggested retail price of 471 yuan to 50,420 yuan per kilogram, and 75% of the selling prices are between 1,000 yuan and 5,000 yuan.
Is this ** conducive to dynamic sales?Is it better to tell a growth story with more product classification and structural optimization?
As of June 30, 2023, Lancang Ancient Tea has a total of 23 self-operated stores and 520 dealer-operated stores. In 2020, there were 566 dealer stores.
Inspired by small pots of tea
According to public information, Lancang Ancient Tea was founded in 1966, formerly known as Lancang County Ancient Tea Mountain Jingmai Tea Factory. In 1998, it was restructured into Lancang County Ancient Tea, and the founder was Du Chunyi.
According to the information on the official website, the company has mastered the first-hand high-quality raw material resources of many famous mountains in Yunnan Province, and has about 4,000 tons of raw materials and finished product inventory, and the original "Lancang Flavor" has become a good story in the industry. In 2019, Lancang Ancient Tea was selected as one of the "Top 100 Enterprises in China's Tea Industry" and won the "Yunnan Time-honored Brand". In July 2022, a new product line, Rock Cold, was launched to cater to the needs of different consumer groups.
Frost & Sullivan data shows that in the past few decades, Chinese people's attention to healthy lifestyles has increased, and per capita disposable income has continued to increase. Benefiting from this, the market size of China's tea market in terms of revenue increased from RMB395.6 billion in 2017 to RMB570.6 billion in 2022, at a CAGR of 7.%.6%。
Industry analyst Sun Yewen believes that relying on scarce tea gardens, improving products and superimposing consumption upgrades are important reasons why Lancang ancient tea won the first share. However, with the popularity of new tea drinks, consumers are becoming more and more rational in their choices, and the intensification of industry competition has diluted the premium space of products. Lancang Ancient Tea has thousands of products** at every turn, as well as niche consumer groups, which is obviously not conducive to the company's bigger and stronger.
In addition to product and marketing strategy innovation, it is also necessary to pay attention to capturing the new trend of consumption and getting close to consumers at the top end.
Threesome, see the sages.
When it comes to tea brands, we have to say that small pots of tea are all the rage. Its launch anchored the premiumization. In June 2022, Xiaocan Tea released the brand year with the title of "Moutai in Tea". At the end of 2022, Nianji announced a 10% increase in the price of all products.
However, looking back on its high-end, it has also encountered a bottleneck crisis. According to ** reports, the retail scale of small pots of tea in 2018 reached 2 billion yuan, but the sales in 2019 and 2020 declined due to multiple factors.
At that time, in the face of doubts, Du Guoying's solution was to improve the brand matrix. In his words, by building four brands, a matrix of "one can, one bag, one cake, and one machine" will be formed, so as to cover different belts and different consumer groups, and provide a set of Chinese tea solutions in all scenarios.
Does this inspire Lancang ancient tea?
According to 36Kr, the average price per kilogram of most of Lancang Ancient Tea's 1966 products is between 1,000 yuan and 5,000 yuan. The average selling price of China Tea's main tea products in 2022 is 300 yuan per kilogram, and that of Bama Tea is 743 yuan per kilogram.
Let the bullets fly a little longer
The good news is that in the face of development problems, Lancang Ancient Tea also has to be prepared for danger in times of peace and put forward targeted solutions.
For example, rebranding the matrix. Launched a series of rock cooling products for mass consumers and new middle-class consumers, aiming to cultivate the second growth curve.
Another example is to optimize the channel layout. In order to break the traditional distribution model, explore the joint operation model. That is, with Lancang Ancient Tea as the leading and joint excellent partners, Lancang Ancient Tea will be jointly incubated and operated in the core business districts and high-end communities of core cities across the country, so as to realize the upgrading of the channel layout of first-tier and new first-tier cities.
In addition, it has made efforts to operate e-commerce and adopted certain growth strategies. For example, through the e-commerce team to recruit additional talents, regularly plan live programs with major e-commerce platforms, deploy advanced logistics management systems specially designed for e-commerce operations, continue to expand the product matrix, and promote a series of exclusive products focusing on Internet consumers.
As of June 30, 2023, 103% from self-operated** sales.
For the IPO fundraising, Lancang Ancient Tea said that it will be used to establish a modern logistics and warehousing center, build a new production workshop and improve the existing production workshopBuild a sales pipeline;Brand building and product marketing;Strategic investment and acquisition opportunities in the tea industry;Upgrading IT infrastructure and further strengthening R&D capabilities.
It can be seen that Lancang ancient tea is also dying in the sun and has the heart of innovation and evolution. From this point of view alone, all walks of life, including investors, should also give companies more patience and confidence. It is normal for stock prices to fluctuate for a while, so you might as well let the bullets fly for a while.
We have to work harder!
On January 2, Mixue Bingcheng and Gu Ming officially submitted listing applications to the Hong Kong Stock Exchange. If the listing is successful, it will naturally increase the space for investors to compare and choose.
Looking at the listed "old gun" Tianfu tea, due to sluggish performance, the stock price continues to be sluggish, and as the core business gradually turns to real estate, Tianfu has been questioned in a sense as a tea concept stock.
There are thousands of ways to say, and iron needs to be hard. In particular, the Hong Kong market is dominated by institutional investors, who only look at their strength and do not recognize their qualifications.
Listing is just the beginning of the value marathon. And the break is also a wake-up call, can we check and fill the gaps as soon as possible?How to tell a good growth story thoroughly?Let's look at the 2024 of Lancang Ancient Tea.
This article was originally written by Shoucai