1. Incidents
The company announced that it plans to increase the capital of its wholly-owned subsidiary CITIC Guoan Wine Marketing Co., Ltd. by 34.0263 million yuan in cash or in kind.
2. Our analysis and judgment
(1) Capital increase marketing companies promote model transformation
After the capital increase, the registered capital of the marketing company increased to 84,0263 million yuan. The net profit of the marketing company attributable to the parent company owners in 2012 was 6.3353 million yuan, accounting for 63.67% of the company's net profit.
We believe that increasing the capital of the marketing company is a continuation of the company's expansion of the marketing business model. This year, the company made targeted marketing strategy adjustments and increased marketing investment. The sales volume of finished wine in the first half of the year increased 11.34% over the same period last year, maintaining a trend of continuous sales growth. Currently, the company owns brands such as “Nia”, “Western Sand”, “Xintian”, and “Western Flame”, and a new Portuguese flavor liquor will also be launched on the market.
The company's winemaking grape base is about 150,000 acres, distributed in the northern foothills of Tianshan Mountain and the Yili River Valley. The main variety is Cabernet Sauvignon.
(2) Observe whether the company can surpass industry data
Since 2013/5, the monthly growth rate of the industry has continuously declined sharply due to the influence of the base figure and the boom. The monthly production growth rate in 2013/5 declined sharply after -1% in April, and the decline reached 27%. Previously, we thought that the monthly production data for May was indeed low, but the base figure was also one of the reasons for the sharp decline in monthly production in 2013/5. However, after that, the monthly production growth rate continued to decline in June, July, and August. Although monthly production was higher than in May, the absolute value of production was still at a historically low level. This situation may indicate that the pressure on the domestic wine industry may be worse than expected.
Since 2013, there has been a marked decline in the year-on-year growth rate of the quantity and value of wine imported by China. From January to July 2013, China imported 241,400 kiloliters of wine, a slight increase of 0.1% over the previous year, down 9.9 percentage points from the same period last year; the amount of imported wine reached 1,356 million US dollars, an increase of 1.3% over the same period last year, a decrease of 23.6 percentage points over the same period last year. The monthly import volume in July was 31,600 thousand kiloliters, and the import amount reached 184 million US dollars.
3. Investment advice
Pay attention to the changes in the company's transformation from a production center company to a marketing service company, and give it a “careful recommendation” rating; since it is still in the process of transformation, it is expected that it will lose money in 2013 and make a slight profit in 2014.
