Event: a few days ago, we planned to issue 5500-65 million shares around ST Huangtai (hereinafter referred to as the company) at 14.78 yuan per share (major shareholder Shanghai Houfeng will subscribe 35%, about 19.25 million to 22.75 million shares in cash), raised 813 million yuan to 910 million yuan, and acquired 51% 100% equity interest in Chengde Summer Resort Enterprise Group (hereinafter referred to as Mountain Resort Enterprise). Carried out relevant research, including liquor expert consultation, villa enterprise visit discussion, Chengde on-the-spot investigation, etc.

Viewpoint: 1. The history, scale, mechanism, brand, market share and strategy of the villa enterprise are all very attractive and have many advantages.

The mountain villa enterprise is located in Pingquan County, more than 100km north of Chengde City, Hebei Province. based on its website and other information, it can be found that: (1) the enterprise was founded in 1949, and the main brand old villa wine was named by Emperor Kangxi. The earliest wine-making history can be more than 4200 years ago. Yidi wine is the founder of Chinese old wine. (2) it has 730 million yuan in assets and 1500 employees, and it has subsidiaries such as Liquor Industry Co., Ltd., Feed Co., Ltd., Villa Old Wine Management Co., Ltd., Jinshan Iron and Steel Co., Ltd., etc. (3) the main products are Villa Old Wine, Qijian brand alcohol and DDGS protein feed, corn crude oil and carbon dioxide, etc., with an output of 30, 000 tons of liquor and 100000 tons of alcohol and feed. (4) it is a pillar enterprise in Pingquan County, one of the top 50 enterprises in Chengde Industry, the top 100 private enterprises in Hebei Province, one of the top 30 enterprises in China's liquor industry, and also the largest alcohol manufacturer in Hebei Province. the national top 10 alcohol enterprises are the key leading enterprises of national agricultural industrialization; (5) the overall market share of Hebei wine company ranks second. It has a total of 8 production lines in the filling workshop, with a staff of more than 400 people and an annual output of 30,000 tons. The products include more than 200 varieties of three series of high-end villa royal cellar, red villa and villa old wine. using 280 meters deep Yi Digu well ecological good water, five-grain formula and century-old live bacteria pit brewing, better inheritance of royal tribute wine secret technology, product features for the smell of fragrance new, entrance Qirun, after drinking Qichang, aftertaste Qiya The price of old wine in the Villa has risen rapidly in recent years, and the main income and profits come from products ranging from 100 yuan to 200 yuan, among which the royal cellar (constant temperature cellar) hotel "five spices in one" launched in 2010, with a terminal price of more than 200 yuan, has the fastest growth. (6) "Villa Old Liquor" is a Chinese time-honored brand, and the "Villa" trademark is a well-known trademark in China. In September 2010, it was jointly organized by China Liquor Circulation Association, China Brand Strategy Research Institute and other authoritative organizations. on the ranking of the brand value of liquor enterprises in China, the value of the old wine brand of the villa ranks first in Hebei Province., And listed among the top 30 Chinese liquor brands with 2.888 billion brand value (26th); (7) along the three main lines of "alcohol feed production, liquor marketing and excellent performance" during the 12th five-year Plan period, through the implementation of 100000 tons of alcohol, feed production projects, sewage treatment projects, corn deembryation oil extraction and fly ash ceramsite brick projects to extend the industrial chain We will improve the capacity expansion and transformation project of the 40, 000-ton liquor filling line, focus on promoting the Villa Old Liquor Culture Industry Park project, and invest in the construction of 40, 000-ton Villa Old Liquor production Line, Villa Old Wine Culture Square, Villa Old Liquor Museum, Comprehensive Office Building, etc., and strive to achieve an output value of 5 billion, a rebate of 3 billion and a profit and tax of 500 million yuan each by 2014. (8) strive to become one of the top 20 in China's liquor industry by 2015.

two。 The old wine of the villa has become one of the three golden flowers in Hebei, and its growth rate is surpassing that of the other two golden flowers, Laobai dry wine and Bancheng hot pot wine, and is expected to become another cross-regional strong liquor brand in the north.

Through further understanding, we think that the mountain villa enterprises have the following points in Hebei real estate liquor: first of all, the old mountain villa liquor belongs to Luzhou-flavor liquor, and the high-end liquor has the characteristics of "five-in-one". In regional promotion, it still has great advantages over fragrance and Maotai flavor. At present, the main flavor types of liquor are Luzhou flavor, delicate flavor and Maotai flavor, with consumers accounting for 65%, 20% and 7%, and most consumers are still used to one flavor type. In other words, the consumers of Luzhou-flavor liquor are much more than Fen-flavor and Maotai-flavor, while the company's products are Luzhou-flavor, focusing on middle-and high-end products of 100 yuan and above. In individual high-end wine products, it has the characteristics of "five-in-one", such as strong, clear, sauce, sesame flavor and so on, so it is superior to the old white dry liquor (the old white dry flavor type basically belongs to the fresh flavor type) in product promotion. It also has the advantage of middle and high-end customers than the Luzhou-flavor but low-positioning Bancheng cooking pot wine which also belongs to Chengde city. Secondly, marketing pays more attention to mobilize employees' enthusiasm and flexibility, and pursues active marketing, active marketing and flexible marketing, not just oppressive marketing, passive marketing and stereotyped marketing. Over the past year or so, the villa enterprise has adopted a new marketing strategy, adding more than 200 marketing personnel in two years, and implementing the salary marketization, comparing the salary level with the marketing personnel of other enterprises, and mobilizing their enthusiasm through salary. In the promotion of new products, represented by Chengde, Shijiazhuang, Xingtai, Handan, Tangshan, etc., some mainly get promotion rights (such as Handan), some highlight group buying (such as Xingtai), and some implement terminal buyout (such as some suburban counties of Shijiazhuang). As a result, Hebei's market share quickly surpassed Bancheng hot pot wine and ranked second only to old white dry wine in a short period of time. Third, the company cooperates with first-class liquor marketing planning companies, which will benefit a lot in terms of strategy, marketing, products, market layout, talent, resource integration and so on. The company chose a first-class liquor marketing consulting company with advanced thinking, industry understanding, profit model and action route as its strategic partner., In terms of strategic planning, the consulting company has combed and repositioned the villa enterprises in six aspects: first, to implement the brand leading strategy, from channel-driven to brand-driven, to achieve high-end products, to demand products, and to promote usefulness, such as red villa wine to highlight the moment of celebration. The second is the regional expansion strategy to form the leading Hebei, with Liaoning, Liaoning, Inner Mongolia and Tianjin as the main battlefields to further radiate the national market pattern, and the third is the operation upgrading strategy, the specialization of management functions and cooperation with specialized companies. promote the scientific management of the company Fourth, the channel strategy to achieve accurate positioning, according to products, market conditions, looking for restaurants or agents, to deep farming, Hebei market to do a thorough, full coverage of products, to enter the countryside, rural areas, villages, households, to achieve a win-win situation for manufacturers; fifth, the nationalization of talent, quickly solve the two shortcomings of capital and talent. The company has more than 400 marketing personnel, has added more than 200 people in two years, and carried out two-month training; to achieve the echelon of the team, the salesman standard is a college degree, mainly in rural areas, and can bear hardships and be down-to-earth, as grass-roots salesmen are more at ease and have the ability to execute; to realize the marketization of salary, compared with the marketing personnel of other enterprises, to mobilize their enthusiasm through salary. The sixth is the cultural and economic strategy, such as the planning and construction of the old wine cultural industrial zone of the mountain villa, which is a provincial project, with cultural squares, forests of steles, museums, filling lines, office buildings, etc., when selling products, through visiting and experience, interact with consumers, provide leisure and sightseeing platform.

Fourth, the mountain village enterprise belongs to the private enterprise, the system mechanism is superior to the peer. At present, the government accounts for 12% of the shares, and the rest is owned by management and other individuals. This fully privatized system and mechanism is not too much in the liquor industry, and the existing privatized liquor enterprises such as Yanghe and Lang Liquor have realized the dream of becoming bigger and stronger. For villa enterprises with the same institutional mechanism, it will not be too far away to achieve great-leap-forward growth. We have learned from some tobacco hotels and supermarket stores in Chengde that in the past year or two, villa enterprises have increased publicity and marketing efforts, and can get services several times a week. The main products of villa enterprises represented by old villa wine, royal cellar, iron hat, etc., sell better or even much better than other local brands, and have become the first local liquor brand in Chengde.

Considering the advantages of the products, operation, strategy, system and mechanism of the villa enterprise, we believe that it realizes strong marketing in Hebei, Tianjin, Liaoning and Inner Mongolia. It is more likely to become a medium-sized Luzhou-flavor liquor enterprise with sales of 3 billion yuan in 2015, equivalent to 7.5 times that of 2010, with an average annual growth rate of about 50%. 3. The future growth of the company will show double superposition or even multiple superposition expectations, and the villa enterprise may be its first M & A target.

It can be understood from the following aspects: first, the third path taken by the company can be replicated. A liquor enterprise in Gansu Province, cross-regional mergers and acquisitions in Hebei, not only did not change the administrative affiliation of the latter, did not interrupt and change the existing tax, employment and other interest chains that the local government attaches great importance to, on the contrary, through professional planning, strategic restructuring, marketing transformation, financing facilities, etc., to speed up the development of enterprises. It can be considered that similar models can be extended to Shandong, Jiangxi, Henan, Sichuan and other major liquor production and marketing provinces (non-liquor brand provinces); second, Chinese spirits are rich in resources for mergers and acquisitions. Based on the sales income of 350 billion yuan in China's liquor industry and about 50 billion yuan in listed companies in 2010, the sales of spirits with convenient capital market or securitization accounted for only 14.28%, and the proportion of sales was even lower, less than 4.5% (liquor industry sales of 8.9 million tons, liquor listed companies less than 400000 tons), the industry concentration is very low. If the sales revenue of the liquor industry increases by 20% to 30% in the next five years, it will reach 800 billion by 2015, and if 10% of them are merged, it will have a M & A scale of 80 billion yuan; if the industry's average profit margin reaches 15%, the net profit related to M & A can reach 12 billion yuan; if the market-to-sales ratio reaches 10 times, the market value of M & A will reach 80 billion yuan. Third, the company is backed by a famous liquor professional marketing company, which has good accumulation and advantages in the evolution of liquor territory, understanding of industry trends, strategic and tactical positioning, product innovation and marketing, optimization and integration of resources, etc. the M & An is a professional connotative M & A, which is not a "recitation of the classics of foreign monks" (that is, non-liquor capital enters the liquor industry). It is difficult to understand the essence of the industry. It is not that "foreign monks chanting sutras" will not be satisfied with the soil and water.

4. If the M & An is successful, it will undoubtedly create a precedent of cross-regional mergers and acquisitions and snacks within the listed companies in the liquor industry. at the same time, it is also the third way for listed companies in liquor industry to win after brand and marketing, which belongs to the internal development model of the industry. it is a new stage in the process of industry evolution and accords with the general trend of industry development.

So far, domestic liquor listed companies have gone through two ways to become bigger and stronger: one is the brand leading road represented by Maotai, Wuliangye, Luzhou laojiao and Fenjiu, and the other is the marketing leading road represented by Yanghe, Gujinggong and Jinzi Liquor. ST Huangtai is located in Wuwei City, Gansu Province, Hexi Corridor. Luzhou-flavor liquor brewed with five grains formula was praised as "Maotai in the south and Huangtai in the north" in the 1990s. After several ups and downs, the lowest sales income of liquor since 2008 was only more than 25 million yuan, several stagnant, and the stock was almost delisted. In the first half of 2011, the introduction of strategic investors to implement cross-industry restructuring, re-carding and innovating products and marketing systems, coupled with debt restructuring, enabled enterprises to tide over the difficulties, from a loss of more than 58 million yuan to a profit of 7.5 million yuan from 2008 to mid-2010. we used to call the company's model "the transformation and rebirth of the third-line liquor" (see "Dongxing Securities Food and Beverage Industry Strategy report for the second half of 2010"). This model has been given a new content: its own transformation and rebirth, accompanied by snacks within the industry-in 2010, liquor revenue was nearly 400m yuan, net profit, including alcohol and feed, was nearly 70 million yuan, and liquor revenue was expected to reach 600 million yuan in 2011. the growth rate of more than 50% will be maintained in the next two years, and the net profit will maintain a higher growth rate.

In other words, whether it is the scale of income, profitability or business structure and chain, or even identity and cultural history, Villa enterprises are better.

Limited to the current enterprise listing system, the villa enterprise can not be in line with the capital market, and the company just has this superior condition, if the M & An is successful and the common development of the two enterprises is realized, it can be summarized as the third way for liquor listed companies to become bigger and stronger-the road of M & A development. This is a road completely in line with the new era of liquor industry development-the trend of mergers and acquisitions: it can quickly enhance industry concentration, brand height and product health value, reduce grain consumption, and promote energy saving and environmental protection. Conclusion: (1) the merger and acquisition of the mountain villa belongs to the connotative M & A within the liquor industry, rather than cross-industry operation, is the integration and optimization of resources, will form an endogenous growth model, and there is a strong expectation of accelerating the growth of the company. (2) both the company and the villa enterprise are in a period of high growth. If the merger and acquisition is successful at the end of this year, the villa enterprise will not make a great contribution to the company's performance this year, but will make an outstanding contribution in 2012.

Profit forecast and investment rating: considering the information we have obtained from the relevant management, marketing consulting companies and market research of Huangtai Wine and Villa enterprises, it is estimated that the income from 2011 to 2013 will be 128 million yuan, 1.13 billion yuan and 1.81 billion yuan, with growth rates of 100,780 and 60 per cent. Net profit reached 24.89 million yuan, 240 million yuan and 423 million yuan, the growth rate was as high as 867% and 68%, corresponding to PE162 times, 23 times and 13 times, the target price in 2012 can reach 40 yuan, with room for improvement of more than 76%, but in view of the uncertainty of mergers and acquisitions, and the dynamic PE measured by the company's own performance is too high, estimated by the PE of 40 times of the second and third line wine floor valuation. Therefore, it is the first time to give a recommended rating.

Risk hint: if M & A fails and marketing efforts and results do not meet expectations, then PE is too high, forming a valuation bubble.