"mellow wine filled with luminous glasses, just ready to drink immediately heard the urging sound of the pipa", since ancient times, wine culture has been accompanied by the development and growth of Chinese culture, and has been deeply integrated into Chinese civilization.
In recent years, the trend of national tide has spread all over the country, from cars to clothing to daily chemical products, domestic brands are more and more concerned and favored by the public. Under the trend of the rise of domestic products, domestic wine has naturally attracted a lot of attention.
When it comes to wine, dynasty is an unavoidable brand. Dynasty wine industry (Hong Kong stock code: 00828.HK) has been working in China for a long time and is committed to the wine industry. Founded in 1980, it is the second Sino-foreign joint venture in China and the first Sino-foreign joint venture in Tianjin. the main shareholders include Tianjin Food Group Co., Ltd. And French wine giant Remy Martin Group. The brand has a long history and impresses the Chinese people.
Recently, Dynasty Wine Industry announced its performance in the first half of 2021. The company's performance indicators have achieved great growth, the product structure has been continuously optimized, and the marketing pipeline has been reformed and innovated. It is showing a brand new dynasty brand full of vitality to the market.
First, the revenue has doubled, the gross profit margin has increased, and the operation has been sound.
In 2020, the sudden epidemic made the domestic wine industry suffer its worst year in a decade. In 2021, with the control of the domestic epidemic, the rise of the national tide and the entry into force of the anti-dumping resolution, the domestic wine industry ushered in the development opportunity, the industry has signs of recovery, the performance of the dynasty wine industry is one of the best.
According to the financial report, the company's revenue during the period was about HK $179.6 million, which was about double that of about HK $89.9 million in the first half of 2020. The increase in revenue was mainly due to a significant increase in product sales, especially mid-and high-end wine products, after product structure optimization, as well as an increase in market prices for some upgraded and customized products. In addition, the company's performance income in the first half of the year was about 36% higher than that in the first half of 2019 before the epidemic, which was better than that of similar competitors in the industry.
The sales revenue of red wine products is the main source of contribution to the dynasty wine industry, accounting for about 58% of the revenue in the first half of 2021. The average ex-factory prices of both red and white wines under the dynasty brand increased in the first half of 2021. Due to the price increase effect, the gross profit margins of red wine products and white wine products were 39% and 35% respectively, higher than 30% and 31% respectively in the same period in 2020. The company's overall gross profit margin increased to 38% in the first half of this year, up about 8 percentage points from the same period last year and better than in the first half of 2019.
Benefiting from increased sales of mid-and high-end wine products and higher gross margins, the profit attributable to the company's owners in the first half of this year was about HK $19.5 million. In the first half of 2020, the profit attributable to dynasty wine owners was about HK $143 million, mainly due to the company's non-recurrent income of about HK $184 million from the completion of the dynasty sale of wine castles and related facilities in January 2020. and non-recurrent staff compensation of about HK $13.3 million as a result of the implementation of the staff reform plan. Excluding the effects of these two non-recurrent gains and expenses, the Group's adjusted consolidated loss for the same period last year was about HK $27.8 million, and the profit attributable for the period was about HK $19.5 million, which was a substantial improvement over the same period last year and successfully turned a loss into a profit.
As of June 30, 2021, the company's cash and cash equivalents and short-term deposits were about HK $237 million, up 30 per cent from about HK $182 million at the end of 2020. The debt-to-asset ratio (total liabilities divided by total assets) has decreased from about 63% at the end of 2020 to about 60%, maintaining a healthy level. Abundant cash and sound financial position have become the core competitiveness of the dynasty wine industry, providing adequate financial guarantee for the company's business development, day-to-day operation and capital expenditure.
Since 2021, the price increase of materials in various industries has become a topic of concern in the market, but the operating cost of Dynasty Group is in a steady state of operation.The company's main raw materials for wine production include grapes, grape juice, yeast and additives, as well as packaging materials (including bottles, caps, labels, corks and packing boxes). In the first half of the year, the cost of grapes and grape juice was the main component of the sales cost, accounting for about 45% of the company's total sales cost, which remained stable compared with about 44% in the same period in 2020.
Excellent cost control ability comes from the company's management of upstream suppliers. Dynasty Wine has more than a dozen long-term major grape juice suppliers in high-quality grape producing areas such as Tianjin, Hebei, Ningxia and Xinjiang to ensure a reliable supply of high-quality grapes and grape juice to meet the needs of business growth.
In November 2020, Tianjin Food Group Co., Ltd. strengthened its support in the network of raw material suppliers, greatly ensuring the stable quality of grapes and grape juice (including original wine), as well as shortening delivery time and transportation and warehousing costs.
As of the end of June 2021, the company's annual production capacity remained at 50000 tons, enough to enable the company to respond quickly to market demand and provide a platform for sustainable profit growth.
The employee reform plan implemented by the company in 2020 has played a positive role in improving the company's management efficiency and reducing management costs. The management expense rate of the company in the first half of 2021 was 12.0%, down 34.2 percentage points from 46.2% in the same period last year, and 13.3 percentage points from 25.3% in the first half of 2019. In addition, measures to improve operational efficiency, such as warehouse optimization and employee reform plans, have significantly reduced the company's distribution costs from about 31% of the company's revenue in the first half of 2020 to about 16% in the first half of this year.
The rebound of the performance of the dynasty wine industry benefits not only from the growth effect brought about by product price increases, but also from the outstanding contributions of operation optimization and corporate governance. The company began to carry out marketing reform in 2019, and successively launched a series of new market strategies, such as the "2-3-4" strategy and the "tens of thousands" project. In 2020, the dynasty wine industry ushered in a new chairman, Wan Shoupeng. He is the board chairman and senior engineer of Tianjin Food Group, a major shareholder, and has extensive experience in China's food industry and management. Under the leadership of the new chairman, the company further deepens its business reform and focuses on the "540 N" product strategy, bringing new driving forces to the company's business.
Second, product + marketing reform has made great efforts, and corporate governance has achieved remarkable results.
As a wine brand with a history of more than 40 years, the dynasty wine industry has been fresh for a long time. Since 2020, the company has continuously carried out product and marketing pipeline reform and achieved phased results.
On the product side, the dynasty wine industry has mature and diversified products.At present, we manufacture and sell more than 100 kinds of products, such as red wine, white wine, sparkling wine and so on. At the same time, the company also sells about 110 imported wine products from about 20 brands imported from France, Italy, Germany and other countries.
In the continuous construction of product competitiveness, Dynasty Wine Industry adheres to the product layout strategy of "520 4N", optimizes product categories, and constructs a high-quality product portfolio that meets different consumption scenarios, covers all categories and all mainstream prices.
In the product strategy, 5 refers to five series, including dry series, seven-year Tibetan series, Merlot series, classic series and best-selling series, covering all mainstream prices; 4 refers to the four dominant categories of dry red wine, dry white, brandy and sparkling wine; N designated products.
Making use of the above-mentioned high-quality product mix covering all consumption ranges, the new product strategy of dynasty wine industry strives to meet the diversified needs of consumers, fully tap consumption potential and enhance market share.
In the marketing reform, the company continues to increase the construction of the market network, adhere to brand promotion, pipeline upgrading go hand in hand.
In terms of brand promotion, the dynasty wine industry continues to increase its exposure through strategic advertising.Choose to name high-speed trains in key markets such as the core areas of Jiangsu, Zhejiang and Shanghai, and carry out marketing activities throughout the country through terminals in these areas and online and offline sales channels such as JD.com flagship stores and Tmall flagship stores.
On the pipeline, the company keenly captures changes in Chinese consumer behavior and strengthens cooperation with online and offline distributors.
Online, the company has opened online stores in Tmall, JD.com and Pinduoduo, and Tmall supermarket has also become a distributor of the company. In addition, the company actively operates new network sales channels, such as second-line sales and distribution platforms, social e-commerce platforms and community e-commerce platforms, and sets up e-commerce teams. and in the form of e-commerce live broadcast to further expand its sales channels and build a new customer base.
Offline, the company ploughs the four channels of tobacco and alcohol stores, Shangchao, catering and community circles, through flexible interactive forms and thematic participation activities, opinion leaders' promotion, content marketing, etc., to realize the diversification and interconnection of pipes. The company also continues to promote the implementation of the "tens of thousands of projects", with the goal of displaying in 20000 stores, holding 1000 wine tasting activities and organizing 1000 trips back to the factory, so as to continue to promote the construction of terminals.
Dynasty wine industry keeps pace with the times, innovates in terms of consumer demand from brands, products, marketing and other key links, and continues to build "Dynasty" into a representative brand of Chinese wine, laying a good foundation for the company's follow-up performance growth.
Third, the rise of the national tide and domestic substitution, the performance of the dynasty wine industry can be expected.
Chinese wine culture has a long history, the image of wine is healthy, and the potential consumer groups in China are huge. However, at this stage, the per capita consumption of wine in China is far lower than the per capita level of the world, while spirits and beer have exceeded the world average, so the industry has more room for growth.
According to the guidelines for the Development of China's Wine Industry during the 14th five-year Plan issued by the China Wine Industry Association, it is estimated that by 2025, China's wine production will reach 700,000 kiloliters, an increase of 75.0% over the end of the 13th five-year Plan, with an average annual increase of 11.8%. The sales revenue reached 20 billion yuan, an increase of 66.7% over the end of the 13th five-year Plan, with an average annual increase of 10.8%. The realized profit was 4 billion yuan, an increase of 30.0% over the end of the 13th five-year Plan, with an average annual increase of 32.0%.
In addition, the Ministry of Commerce announced on March 26, 2021 that an anti-dumping duty of 116.2% Murray 218.4% would be levied on imported wines originating in Australia.
According to the data, Australia is the largest importer of wine in China, accounting for 38% of the total. In the context of anti-dumping, the domestic wine industry ushered in development opportunities and is expected to benefit from the domestic substitution trend.
The development of domestic GDP promotes the improvement of the income level of Chinese residents, which in turn leads to the upgrading of consumption; superimposed by the rise of the national tide and the trend of domestic substitution, the dynasty wine industry, as a domestic wine leader, is expected to benefit from the Matthew effect of the industry and take advantage of the momentum on the road of revival to bring the dynasty wine fashion to more Chinese consumers.
At present, the company has a market capitalization of more than HK $500 million and a price-to-sales ratio of only 1.62 times, which is much lower than the valuation level of similar competitors in the industry. With the continuous promotion of a series of internal reform measures, the performance growth is worth looking forward to, and the company valuation has the potential to repair.
