Event: in late June, the internationally renowned health products giant GNC (Jian Anxi) filed for bankruptcy reorganization.
According to the announcement, GNC has agreed with some of its secured lenders and key stakeholders to implement Chapter 11 restructuring through two options, including a separate restructuring plan and a sale plan. The two plans will proceed at the same time, and GNC is expected to finalize the adoption of one of them so that GNC is expected to complete the Chapter 11 process this fall. Corporate entities outside GNC North America (including GNC's Chinese joint venture with the company) are not included in its Chapter 11 procedures.
Under the above two programs, GNC still maintains normal operation.
International health products retail giant filed for bankruptcy, industry opportunities emerged, excellent enterprises are expected to achieve corner overtaking. GNC is an international retail giant of health products based on the sales model of offline stores. According to the announcement of Harbin Pharmaceutical Co., Ltd., GNC has more than 9000 retail stores in more than 50 countries and regions around the world, providing more than 1500 kinds of health products. Its main business is the research and development, production and sales of nutritional supplements and health products, and distributes similar products from third parties. In the era of booming e-commerce and increasingly diversified consumption channels of health products, the asset-heavy model of GNC self-built channels is becoming increasingly difficult. Operating income continues to shrink from $2.639 billion in 2015 to $2.068 billion in 2019, and the net profit of homing has been negative for three of the past five years.
The COVID-19 epidemic has worsened the company's operations this year. According to the announcement, as of May 6, about 40% (that is, 1300) of its GNC stores in the United States and Canada have been temporarily closed due to government requirements and other reasons, and some of these temporarily closed stores are likely to be permanently closed in the future. In the first quarter, revenue fell 16.3% from a year earlier, and gross profit fell 32.7% from a year earlier. As the representative of the health products retail giant, the collapse of GNC indicates the following trends in the health products industry: 1) from the channel point of view, the share of offline retail channels will be further reduced, and online channels will usher in more room for development. Actively expanding e-commerce business in the future is a choice and opportunity for enterprises. 2) from the perspective of industry competition, the operating difficulties of the giants provide other competitors with opportunities to overtake at the bend, and enterprises are expected to reshuffle; 3) from the point of view of products, consumers pay more and more attention to high-quality differentiation, and the competitive advantage of commodities that are too homogeneous is weak, and the industry will enter an era in which products are king, and enterprises that focus on consumer demand to create high-quality products and strong brands will be better able to stand out.
Jindawei has the advantage of the whole industry chain of health products, and it is expected to further increase its market share by strengthening brand marketing and promotion through three major measures: "core single product, brand e-commerce value, and fast channel strategy".
From 2015 to 2018, the company acquired or participated in Doctor's Best, ProSupps, Zipfizz and Labrada, cut into the field of traditional dietary supplements, sports nutrition and weight management, and participated in iHerb plus downstream channel sales. At present, the company has integrated the whole industry chain of health products from upstream raw material supply to mid-stream production and processing and then to downstream channel sales, thus further enhancing profitability. This year, the company's health products companies in the United States did not reduce production or stop production because of the epidemic. During the outbreak of the epidemic, the outbreak of online channels and the effective management of offline channels made the sales of health products increased rather than decreased. Sales of DRB and Zipfizz brands increased significantly in the first quarter and are expected to perform better for the whole year. In the future, the company will pay more attention to the research and development of new products, constantly enrich the product line, enhance the competitiveness of brand health products, and is expected to further enhance market share.
Investment suggestion: this year, Jindawei coenzyme Q10 is expected to make a profit of more than 600 million yuan, vitamin An and D3 is expected to make a profit of about 600 million, and brand health products are expected to earn more than 100 million. It is estimated that from 2020 to 2022, the EPS of the company will be 2.04,2.35,2.60 yuan, and the corresponding PE will be 12.3,10.6 and 9.6 times respectively, maintaining a "highly recommended" rating.
Risk hints: market expansion is less than expected, downstream demand is lower than expected, product prices fall sharply, raw material prices fluctuate sharply, risks of environmental protection, risks of production safety