Incident: The company's real estate business entity, Shunxin Jiayu's 100% equity project, signed a property rights transaction contract with Beijing Shunzheng Asset Management Co., Ltd. (“Shunzheng Assets”) on November 24 this year, marking the successful listing and transfer of Shunxin Jiayu on the Beijing Property Exchange. The company has received a total transfer price of 2,259 billion yuan from Shunzheng Assets. On December 7, the registration procedures for industrial and commercial changes involving the Japanese sub-equity transfer were completed, and the company no longer holds shares.
Review of Shunxin Jiayu's disposal process: In April 2023, the company used 1,986 billion yuan of its own capital to purchase assets of Shun Xin Jiayu's two buildings; in May, the 4.974 billion yuan claim against Shunxin Jiayu increased capital reserves to accelerate the listing process; in June, it plans to transfer 100% of Shunxin Jiayu's shares at a listing price of 3,098 billion yuan through the Beijing Property Exchange. The proposal was approved at the July Extraordinary General Meeting of Shareholders; in August 2023, it was listed on the Beijing Property Exchange at a transfer price of 3,098 billion yuan, and experienced 3 price adjustments to the bottom of the market in August 2023. 27.89/25.10/2.259 billion yuan. In the end, Shunzheng Assets managed by Shunxin Holdings, the controlling shareholder of the company, participated in the delisting as a transferee. The company signed a property rights transaction contract with Shunzheng Asset on November 24, the relevant equity transfer change procedures were completed on December 7, and the real estate business divestment work was implemented.
The delisting of Shunxin Jiayu's transaction marks the basic completion of the real estate business divestment work, which is in line with progress expectations for completion of real estate disposal by the end of this year. The company's real estate business has been losing money continuously since 2015-2022, with a cumulative loss of 2.7 billion yuan, seriously hampering the company's overall profit level. Judging from the reporting side, the real estate divestment is expected to generate equity disposal profit and loss of -289 million yuan (excluding taxes and fees arising from the transaction). At the same time, the revenue generated by the company's purchase of the two Shunxin Jiayu buildings during the year will not be combined to offset the company's profit and loss this year. It is estimated that the company's profit and loss this year will increase by 575 million yuan. The above two transactions together will affect the company's profit and loss of 286 million yuan this year. Next year, real estate disposal will no longer have an impact on company statements. It is expected that it will effectively ease the pressure on the profit side and reduce volatility and uncertainty. The company divested the real estate business and entered the ranks lightly, highlighting the strategic value of the main liquor business and core brands.
Losses in non-main businesses are dragging down the level of net profit, and the reform of state-owned enterprises empowers business optimization. Losses in the company's real estate and pork business seriously dragged down performance in the first three quarters of 2023. The real estate business was heavily deferred in income taxes due to the sale of fixed assets, and the pork business suffered serious losses due to rising feed costs and low pig prices.
After the divestment of the real estate business, volatility on the profit side is expected to decrease. At the same time, as the company's state-owned enterprise reform and market-based management continue to advance, it is expected that pork business optimization efforts will be increased next year. Profit elasticity is expected to increase as measures such as channel expansion, increased production efficiency, increased pig breeding and prepared food processing, and increased share of high-value-added products to mitigate continued losses in the pork business.
Firmly focusing on the core business of liquor, the gold standard beef store has successfully led the upgrade. The company firmly focuses on the main liquor business. The brand advantages that Niulanshan has accumulated over a long period of time in the bottled wine market have built a moat, further highlighting brand value. The new gold standard is positioned as a 30-40 yuan pure grain light bottle, and the continuous promotion of distribution leads to structural upgrading. The “Golden Standard Beef Restaurant List” marketing project further deepens catering channel channels and enhances brand awareness, and continues to unleash growth momentum under the two-wheel drive of White Bull and Golden Bull.
Profit forecast and investment advice: We believe that the implementation of Shunxin Jiayu's transfer transaction shows that the divestment of the non-main business is progressing smoothly and management's determination to focus on the main business. With K-type recovery favorable light bottle track+real estate divestment and pork business optimization+gold standard leading the upgrade, there is room for improvement at the bottom of the company. We expect the company's revenue for 2023-2025 to be 117.25/126.68/13.709 billion yuan, +0.4%/+8.0%/+8.2% year-on-year respectively, and net profit of -0.54/6.31/987 billion yuan, corresponding to 24-25 PE 27/17X respectively, maintaining the “recommended” rating.
Risk warning: macroeconomic downside risk; risk of increased industry competition; new product promotion falling short of expectations, etc.