The richest man Zhong Sui salutes to his opponent, why doesn t the capital market buy Nongfu Sprin

Mondo Finance Updated on 2024-03-05

"The richest man's enmity record" continues.

On March 3, Nongfu Spring's official Weibo released "Zhong Sui: I have two or three things with Zong Lao". The founder, chairman and general manager of Nongfu Spring, Zhong Sui, said that after the death of Zong Lao, there were a lot of slanders against me and Nongfu Spring on the Internet. As a party who was accidentally involved in the whirlpool of events, it is necessary for him to make a clarification by borrowing several memories of the old man from his lifetime.

On the evening of March 3, the topic "Vice President of Nongfu Spring Responds to Praise Wahaha and Stepping on Nongfu Spring" ranked first in the hot search, and "Zhong Sui denied that the first pot of gold came from Wahaha" also appeared on the hot search.

Sell the purest water and do the most ruthless things

As the saying goes, one mountain cannot tolerate two tigers. In the city of Hangzhou, where people are outstanding, two giants in the beverage industry were born - Wahaha and Nongfu Spring.

According to public information, Hangzhou Wahaha Group was founded in 1987, under the leadership of the founder Zong Qinghou, with a cumulative sales of 860.1 billion yuan in 35 years, profits and taxes of 174 billion yuan, and taxes of 74.2 billion yuan. The products cover more than 200 varieties of packaged drinking water, protein drinks, carbonated drinks, tea drinks, etc.

Nongfu Spring was established on September 26, 1996 and listed on the Hong Kong Stock Exchange on September 8, 2020, with its main products covering packaged drinking water, tea drinks, functional drinks and fruit juice drinks. The latest market capitalization is HK$476.9 billion. According to the 2023 Hurun Report, the founder Zhong Sui became the richest man in China for the third time with 450 billion yuan.

At the beginning of Nongfu Spring's establishment, most of the drinking water market in China was pure water, including Cestbon, Robust, Jingtian, Master Kong, and the old owner Wahaha.

But instead of fighting these brands, Zhong announced the cessation of the production of pure water and proposed the concept of natural water. Subsequently, he conducted "scientific comparative experiments" on plants, animals and cells with pure water and natural water, and concluded that "pure water is not beneficial to health", and "sprayed" all bottled pure water on the market.

On June 8, 2000, Wahaha, together with 69 pure water companies including Robust, Cestbon and Jingtian, collectively denounced Yangshengtang's use of pseudo-scientific means to slander pure water, which was unfair competition, and even caused trouble to the Industrial and Commercial Bureau and the Ministry of Health.

Nongfu Spring has since become famous and has become the No. 1 brand of bottled drinking water in China. On September 8, 2020, Nongfu Spring was listed on the main board of the Hong Kong Stock Exchange, becoming a legend in the capital market. The price-earnings ratio of many high-quality targets in Hong Kong stocks has fallen to about 10 times, and the price-earnings ratio of Nongfu Spring has remained above 40 times all year round, which is higher than that of Moutai in A-shares.

On February 25, Zong Qinghou, the founder of Wahaha Group, passed away due to illness. At the same time, there was a storm on the Internet of "praising 'Wahaha' and stepping on 'Nongfu Spring'".

On March 3, Zhou Li, vice president of Nongfu Spring, posted a response in the circle of friends: Mr. Zong Qinghou is the first seven today, and maybe the old man Jiuquan did not expect that his death would be used by some so-called "melon-eating masses" to attack another company in the same city, and become a hot spot. The two companies are located in the same city, and although there was competition in the early years, and even went to court, they still competed openly under the legal framework.

On the same day, Nongfu Spring's official Weibo released "Zhong Sui: I have three things with the elder Zong". In the article, Zhong recalls his entrepreneurial experience, his experience working at Wahaha, and the differences between his philosophy and Zong Qinghou's after founding Nongfu Spring and related lawsuits.

My respect for the entrepreneurial spirit of the patriarch has never wavered. I have always said on various occasions that Zong Lao is a representative of entrepreneurs that I respect. Zhong said that he hoped that while the majority of netizens expressed their remembrance of the elders, they would not be led by individual self-leaders or big Vs.

It's a good company, but it's not necessarily a good investment

According to public information, Nongfu Spring started with packaged drinking water, and as a "porter of nature", Nongfu Spring has occupied the first market share of packaged drinking water in China for many years. Despite the adverse impact of the three-year special period, the revenue can also maintain continuous growth, of which the net profit in 2022 is as high as 849.5 billion yuan. The company's gross profit has been maintained at about 60% for a long time, and it is also known as "Moutai in water" in the industry.

Someone once calculated: the ex-factory price of a bottle of Nongfu Spring for 2 yuan is only about 06 yuan, then for every bottle of water sold, you can get about 0The gross profit of 36 yuan, while the cost is only about 024 yuan. More than half of that cost is bottles, about 0$12. And the water, which is almost free, is not even worth 1 cent. I have to say that this money is really ridiculously good.

The beverage track, represented by tea drinks, functional drinks and fruit juices, is a new growth point for Nongfu Spring. From the perspective of profitability, the revenue growth rate of tea drinks is very fast. In particular, with the rise of sugar-free tea drinks, Nongfu Spring's Oriental Leaves, launched in 2011, became popular again after 10 years, and this once rated as the "most unpleasant drink" has achieved tremendous growth in 2021.

As of the first half of 2023, the total revenue of tea beverages, functional drinks, and fruit juices will be 6.6 billion, accounting for 398%;The total profit of the three businesses was 37600 million accounted for 487%, with packaged drinking water 49The contribution rate of 2% is only 05 percentage points.

Whether from the perspective of net profit or cash flow from operating activities, Nongfu Spring is a very good enterprise. However, from an investment perspective, the short to medium term may not be a good investment target.

In the eyes of analysts, Nongfu Spring is overvalued, and although the brand is a household name, it is not a determining factor in purchasing decisions. In addition, although Nongfu Spring has high-quality water resources, this cannot be considered a barrier.

Nongfu Spring's shareholding structure is very centralized. Chairman Zhong holds nearly 84% of the shares, which is also the key to his ability to become the richest man for three consecutive years. In addition, the Lu family, Zhong's wife, holds a total of 62%, and other directors, supervisors and core affiliates of the company hold 053% of the shares. These shares are largely unchanged, resulting in a very small percentage of outstanding shares.

At present, the dynamic price-earnings ratio of Nongfu Spring is higher than that of Kweichow Moutai, and it is much higher than that of other well-known beverage listed companies at home and abroad. Many market views are worried that Nongfu Spring will face pressure to revert to the mean in the future and will continue to face in the future, which means that the stock price is likely to be difficult to continue to rise.

Recently, a series of negative events have gradually dragged Nongfu Spring's share price to the trough. As of March 4, Nongfu Spring**42HK$25 shares, down 152%。

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