BESTORE, as a well-known snack food brand in China, once had unlimited scenery in the capital market, and its stock price was once as high as 8698 yuan, with a market value of more than 26 billion. However, since the lifting of the ban in February last year, BESTORE has been targeted by a number of institutional investors, the most notable of which is its third largest shareholder, Hillhouse Capital.
Hillhouse Capital is a private equity company focusing on value investment, and once invested in BESTORE with a strategic stake of about 800 million yuan in September 2017, with a shareholding ratio of 1167%。In February 2020, after BESTORE went public, Hillhouse became its third largest shareholder, second only to founder Wang Zehe and China Resources Group. However, Hillhouse did not plan to hold BESTORE for a long time, but carried out three rounds and four times in less than a year after the lifting of the ban, with a cumulative cash of more than 900 million yuan.
Recently, BESTORE released the latest **progress announcement[1][2], showing that Hillhouse has terminated this round of **plan, with a total of **591180,000 shares, accounting for 6% of the company's total share capital, cashed out about 45.6 billion yuan. Up to now, Hillhouse holds a total of 3602 shares of the company380,000 shares, accounting for 898%。This means that Hillhouse has changed from a strategic investor to an ordinary shareholder, and its confidence and expectations in BESTORE have been greatly reduced.
So, why does Hillhouse want to be a good store?What kind of investment logic and market judgment is behind this?We can analyze it from the following aspects:
First, the growth of BESTORE has declined. As a snack food brand, BESTORE's core competitiveness lies in brand influence and product innovation capabilities. However, judging from the financial report data, there are certain problems in these two aspects of BESTORE. From the perspective of brand influence, the revenue growth rate of BESTORE has increased from 32 in 20195% down to 14 in 20209%, net profit growth rate from 36 in 20197% down to 13 in 20209%, gross margin from 358% dropped to 33 in 20208%。These data show that BESTORE's market share and profitability have been challenged to a certain extent, and the brand's attractiveness and loyalty have declined. From the perspective of product innovation ability, BESTORE's main business is still dominated by nuts, accounting for more than 60%, while the contribution of other categories is relatively low, and it lacks obvious differentiation advantages. This shows that BESTORE's product structure is relatively simple, and its innovation is insufficient, which makes it difficult to meet the diversified needs of consumers and resist the competitive pressure of peers.
Second, BESTORE's valuation is too high. As a company that has been listed for less than two years, BESTORE's share price has soared from the initial issue price of 225 yuan rose to 8698 yuan, the price-earnings ratio was as high as 100 times, and the market value exceeded 26 billion. Such a valuation level obviously does not match BESTORE's performance growth and industry status, nor does it conform to the principle of value investment. According to data from Frost Sullivan, a third-party statistical agency [2][1], the market size of China's snack food industry exceeded 12 trillion yuan, but the concentration of the industry is low, the market share of the head brand is less than 10%, and the competition is fierce. Although BESTORE is one of the leading companies in the industry, its market share is only about 3%, and it is facing the challenge of many strong competitors such as Three Squirrels, Laiyifen, and Baicaowei. Under such circumstances, BESTORE's high valuation is unsustainable, and the market's revaluation of its value is inevitable. In fact, since the stock price hit a record high in July last year, the share price of BESTORE has been **, and so far, it has fallen by nearly half, and its market value has shrunk by nearly 20 billion.
Third, the risk of BESTORE increases. As a snack food brand, BESTORE's risks mainly come from the aspects of chain management, quality control, and market supervision. In terms of chain management, BESTORE's raw materials mainly rely on foreign imports, such as nuts, candied fruits, etc., which makes its cost affected by factors such as exchange rates, tariffs, and transportation, and also increases its instability to raw materials. In terms of quality control, BESTORE's products involve multiple categories, such as nuts, dried meat, pastries, biscuits, candied dried fruits, etc., which requires it to ensure the safety, hygiene, freshness and taste of the products in the production, storage, transportation and sales, otherwise once there is a quality problem, it will damage the brand image, affect consumer trust, and even cause legal disputes. In terms of market supervision, BESTORE's products involve multiple regulatory departments, such as the Food and Drug Administration, the Market Supervision Administration, the Administration for Industry and Commerce, etc., which requires it to comply with relevant laws and regulations in terms of product labeling, advertising, and management, otherwise once it is investigated and punished, it will face serious consequences such as fines, suspension of production, and revocation of licenses.
To sum up, the termination of the major shareholder of BESTORE after cashing out 400 million yuan** reflects the market's revaluation of its value, and also exposes its problems in growth, valuation, risk and other aspects. If BESTORE wants to restore its former aura, it needs to make more efforts in brand building, product innovation, chain optimization, quality improvement, risk prevention, etc., so as to adapt to the changes in consumer demand and the competitive pressure of the market, and achieve sustainable development.