Since 2024, the CSI Liquor Index has fallen for 6 consecutive days, and it has been 8 this year39%, it is indeed very difficult, destroying the confidence of too many people, in fact, I am still investing in liquor, definitely called a value investor, this last value investor, many people have been unable to hold on, if let me say, I have been saying a lot of things, in fact, now it has become a reality, short-term fundamentals macroeconomics, everyone to the front, I am not more optimistic than any one, but for a small number of listed companies, I am still very optimistic, many people ask me what to do, I answer a few questions.
Can Wuliangye still be held?
Many people say that Wuliangye's net profit will decline next year, in fact, this possibility is very large, even if it is pessimistic, in the industry's most lonely 2014, Wuliangye's net profit is only down 26%, Wuliangye's fundamentals are very solid, China's high-end liquor, except for Moutai's 50,000 tons, there is only Wuliangye, China's 1.3 billion people, the richest part, the leading part of each industry, completely finished Moutai, Wuliangye enjoyed this part of the overflow, in fact, Wuliangye is more than 2w tons per year, We said that Moutai was not affected, and Wuliangye was actually under a certain shelter, so why did I insist on holding Wulangye?
1. Valuations are already pricing in a future recession.
Today, the market value of Wuliangye fell below 500 billion yuan, excluding cash assets of 100 billion yuan, and the corresponding market value of liquor business assets is 400 billion yuan, and the net profit generated by Wuliangye's annual liquor business in 2023 will be about 27 billion yuan, and the liquor business will only be 148 times the valuation, has been far lower than the normal valuation, even if the future Wuliangye liquor business ability to obtain free cash flow as low as 15 billion yuan, and then set sail again to start growing, this kind of net profit is almost all free cash flow enterprises, the normal reasonable valuation is about 30 times, leaving a margin of safety, 25 times the valuation, 2.515 billion yuan + 100 billion cash assets = 475 billion yuan.
In other words, the current market expects that the ability of Wuliangye's liquor business to obtain free cash flow will decline to 15 billion yuan in the future, and the free cash flow generated by Wuliangye's liquor business in 2023 will be 27 billion yuan.
2. Liquor will not expire, and the production and marketing of Wuliangye are in a tight balance.
According to the 2022 annual report of Wuliangye, the production volume of Wuliangye products in 2022 was 3370,000 tons, with a sales volume of 3270,000 tons, there is a tight balance between production and sales, and the inventory is only 0290,000 tons, liquor is just expired, in fact, it can be received for a year or two The market environment is not good, resulting in a decrease in shipments and an increase in inventory, waiting for the market to pick up, this part of the inventory can still be sold, but it is just to confirm the difference in the year.
If it is pork, digital electronic products, it is completely wasted if it is not sold, causing a significant loss of assets, but the liquor will not expire, but the more the liquor will be better, and the more you change the bottle, you can sell it at a higher price, as long as you believe that the future will be better and better, and the future economy will become more and more developed, then this is not a thing.
3. Wuliangye will not necessarily decline next year.
Wuliangye's outlook for 2024:
In 2024, Wuliangye will adhere to the general tone of seeking progress while maintaining stability, focus on value creation as the traction, focus on improving quality and efficiency, maintaining integrity and innovation, optimizing layout and deepening reform, promote quality reform with efficiency and power reform, achieve effective improvement in quality and reasonable growth in quantity, and accelerate the construction of a world-class wine enterprise. To achieve higher quality, more efficient, more sustainable and steady growth, to ensure that channels increase efficiency, shareholder returns, employee income, tax revenue, and corporate profits, at the enterprise level, the goal is to maintain profit growth.
The reduction of 20% of the shipments does not mean that the profits will be reduced by 20% next year, and the reduced shipments will be invested in special specifications of Wuliangye, cultural wine and other products, as well as direct sales channels and the international market, to maintain the five most advanced system.
No matter how you look at it, Yanghe looks like it was sent.
Zhang Kun - In fact, whether it is expensive or not, it doesn't matter how much it rises, it does not depend on PE (price-earnings ratio), PB (price-to-book ratio) or PS (price-to-sales ratio). It depends on one thing: if you have enough money, are you willing to privatize it, and can you live up to it?
So we can all ask ourselves, if you have 150 billion cash now, are you willing to privatize Yanghe?
Today, the market value of Yanghe shares is 150 billion yuan, if you are asked to buy 100% of the shares of Yanghe shares with 150 billion yuan, and delist from the privatization of A shares, Yanghe shares become your private company, are you willing?
Let's calculate this account, in April 2024, Yanghe shares will announce the first quarter report, when Yanghe shares of cash assets should be about 40 billion (bank wealth management + equity investment), if this year's dividends, cash assets must not be so much, but after dividends, the market value of the corresponding enterprises is also declining, which is a reason.
Many people say that if a liquor company does not pay dividends, cash assets have nothing to do with investors, but if you can think about it from the perspective of privatization, why is it not relevant to you? If Yanghe shares become your private company, these cash assets are your cash flow at your disposal, how can you not count this value?
If you have a company now, with 0 operating income and 0 net profit in 2023, but the company has 40 billion bank deposits in its account, and now I buy your company, will you sell it to me for less than 40 billion?
So in fact, the value of Yanghe's liquor business, the market price is only 110 billion yuan, we don't talk about the future, just now in 2023, the cash flow generated by Yanghe's liquor business is about 10.6 billion yuan, and the market valuation price of Yanghe's liquor business is 103 times.
That is to say, if I spend 150 billion yuan to buy 100% of the shares of Yanghe shares, delist Yanghe shares from the privatization of A-shares, and dispose of all the cash assets of Yanghe as soon as possible (Yanghe does not need to maintain capital expenditure), then I actually only spent 110 billion to buy all the shares of Yanghe shares.
As long as Yanghe shares can maintain 10 liquor business in the future3 years at this level of income, then I am not losing money on this transaction, of course, if you are rational, you have to count the inflation rate and risk-free rate of return, after all, cash is also valuable, theoretically speaking, as long as Yanghe's liquor business can maintain the current income level in the next 12 years, then my investment will not be at a loss.
Of course, many people will be barred, take some banks as an example, there are two premises for thinking from this perspective, the first is that the net profit generated by the enterprise is cash flow, and the second is that the enterprise does not need to maintain capital expenditure, not all enterprises can think like this. There is also consideration of the company's responsibility.
Therefore, Warren Buffett said that the value of the enterprise is determined by the sum of the free cash flow created by the enterprise in the future, the principle is this, my judgment is that the future Yanghe shares can continue to grow, although the short-term growth rate may slow down or slightly recession, but the long-term Yanghe liquor business to generate free cash flow level must maintain an annualized growth rate of about 10%, and the liquor industry can survive in China for a long time, Yanghe this company can at least exist for a hundred years.