The author | Eastland
The head image | Visual China
Listed companies that directly provide products or services to consumers, generally known as consumer stocks, catering, retail, condiments, liquor, home appliances, tourism, clothing... Excluding housing/automobiles, etc. "large pieces, excluding special industries such as medicine/Baokang."
The biggest feature of consumer stocks is "weak cyclicality", with the social and economic development, the improvement of residents' living standards, consumption-related industries show a "slow bull" development trend, long-term investors "lying to win" cases abound, it is no wonder that consumer stocks have become the darling of Chinese and foreign capital markets.
But everything has a degree, and even the valuation of high-quality companies will lose investment value.
The underlying assumption for investing in consumer stocks is that performance only goes up and not down. For businesses that "flutter" in a buyer's market, this assumption simply does not hold water. For example, "life is rich, pay attention to nutrition, Huiyuan juice sales and profits are definitely not bad", "the people take food as the sky, and the certainty of sipping and feeding performance is very strong". People may consume more juice and will always love shabu-shabu, but they will not only drink Huiyuan and only eat sipping. Buying Huiyuan juice, sipping and feeding is waiting to count the money, and it is not too easy to make money.
Even the top companies, the performance continues to grow, the leading position is solid, if the performance does not win the stock price, the valuation will gradually rise to an outrageous degree.
At the beginning of the year, china's "trillion market value can be expected" in 601888, and tiger sniffed an article pointing out that "according to Sullivan's forecast, the size of China's duty-free market in 2022 will be 94.4 billion." It is difficult to tolerate trillions of listed companies under the ceiling of 100 billion."
China's leading boss of the 100 billion duty-free market, Haitian Flavor Industry (603288. SH), Hengshun Vinegar Industry (600305. SH) is just a "subset of the condiment industry", and the market value is "high" to 650 billion and 22 billion, respectively, which seems to be a bit too much.
(Note: "Top 100 Condiments" annual sales of about 100 billion, and the growth rate is "single digits")
Revenue and profit growth rate of less than 20%
Curled up under a low ceiling, the "Top 100 Condiments" is divided into 17 "subsets" including soy sauce, monosodium glutamate, vinegar, and cooking wine. Among them, the "soy sauce subset" of Haitian Flavor Industry in the lead includes 35 enterprises, and the "vinegar subset" of Hengshun vinegar in the lead includes 37 enterprises.
1) Haitian flavor industry
The sales volume of soy sauce under Haitian Flavor Industry has ranked first in the country for 24 consecutive years.
From another point of view, leading enterprises mean that the difference is "closest to the ceiling". In 2014, Haitian said in the "Prospectus": "The average annual consumption of soy sauce in China is much lower than that of Japan. "The implication is that the richer you have, the more soy sauce you consume.
However, according to the National Bureau of Statistics, the total demand for soy sauce in 2014 was 9.29 million tons, and in 2015, it rose to 10 million tons and then fell back, and the demand in 2020 was 6.86 million tons, down 26% from 2014. Because the Chinese people have long realized the "freedom of soy sauce", demand does not grow with economic development.
In fact, the 17 "subsets" of condiments are already facing market saturation, and sales have become mainstream.
In this context, the sales volume and revenue growth rate of Haitian Flavor Industry have remained roughly above 15%: in 2020, the revenue was 22.8 billion yuan, an increase of 15.1% year-on-year; in 2021, the revenue of H1 was 12.3 billion yuan, an increase of 6.3% year-on-year. It shows that this is a very good company.
What is more commendable is that the net profit growth rate of Haitian Flavor Industry is higher than the growth rate of revenue. Net profit in 2020 was 6.4 billion yuan, an increase of 19.7% year-on-year; in 2021, H1 net profit was 3.55 billion yuan, an increase of 9% year-on-year.
Sales growth has slowed, and improving profitability by raising prices is a risky move. #茅台都不敢轻易提价 #
2) Hengshun vinegar industry
It is the same as the buyer's market as soy sauce, but the consumer's preference for vinegar taste is very distinct, and the market presents a pattern of "four famous vinegars, each hegemonic party" (Note: Zhenjiang balsamic vinegar, Shanxi Chen vinegar, Yongchun old vinegar, Sichuan Boryeong vinegar).
Hengshun Vinegar Industry is the representative of Zhenjiang Balsamic Vinegar, with a market share of about 10%. But it is not easy to squeeze out the traditional market of other brands, such as getting Shanxi people to abandon old vinegar and use Zhenjiang balsamic vinegar.
Therefore, Hengshun's revenue growth rate is 5 percentage points lower than that of Haitian, barely maintaining at the 10% line.
Hengshun's profitability is very different from Thato-Sky, with an annual growth rate of nearly 20%, and the growth rate of Hengshun oscillating downward. In 2018, Hengshun's net profit growth rate fell to single digits, less than 6% in 2019, negative growth in 2020, and H1 decline in 2021 expanded to 15%.
Baijiu is a sunset industry. The price increase of enterprises above designated size and the difficulty of finding a bottle of Moutai cannot cover up the change of consumption habits. More and more Chinese people choose to drink less or no liquor at all, including the rich and middle-aged and elderly. Demand is falling, and prices cannot keep rising. Moutai does not dare to easily increase prices, where do other brands want to rise?
Although it is not a sunset, compared with clean energy, artificial intelligence, life sciences, and high-end intelligent manufacturing, condiments are by no means a sunrise industry. The best and top companies in the industry, with a revenue growth rate of less than 20%, is very telling.
Although the gross profit margin is high, it is fundamental to have good quality and low price
Haitian Flavor Industry's revenue maintained growth, gross profit margin was high, and it was touted as "soy sauce mao". Moutai has the triple attributes of luxury goods, consumer goods and investment products, which is unique in the world, and all other "XX Mao" is YY.
The more expensive luxury goods are, the more people buy them, and investment products can maintain and increase in value. Soy sauce and vinegar obviously do not have these attributes, whether it is restaurants or individual consumers, the picture is good and cheap.
The background for companies to open up the "second growth curve" is often "fist products" leading the industry, but it is becoming more and more difficult to obtain new shares. Especially in the case of the overall slowdown in the growth rate of the whole industry, the "zero-sum game" between friends and businessmen may be very tragic. Leading enterprises should make plans in advance and lay out in advance.
The "second growth curve" of Haitian Flavor industry is the two businesses of sauce and oyster sauce.
In 2020, the sales revenue of soy sauce, sauce and oyster sauce was 13 billion, 2.5 billion and 4.1 billion, respectively. The performance of the oil was eye-catching, with a year-on-year growth rate of 17.9%, accounting for 19% of revenue. Soy sauce grew at a slower pace than oyster sauce, and its share of revenue fell to the 60% line.
In 2018 and 2019, the gross profit margin of soy sauce remained at the 50% line. Gross profit reached a record 6.18 billion in 2020, but gross margin fell to 47%.
The gross profit trend of sauce and oyster sauce is similar to that of soy sauce, with gross profit of 1.12 billion and 1.45 billion yuan in 2020, respectively, a new high, and the gross profit margin fell by 3 or 4 percentage points.
Observing the cost structure of soy sauce, it is found that the main reason for the decline in gross profit margin is not the rise of raw materials and labor.
In 2020, the cost of raw materials was 5.7 billion, accounting for 83% of the cost of soy sauce production, 6 percentage points lower than in 2019. The proportion of manufacturing expenses and direct labor in the cost has hardly changed.
The decrease in Haitian gross margin was primarily due to the adjustment of freight costs from selling expenses to operating costs in accordance with the new revenue standard.
Hengshun also has a "second growth curve", that is, cooking wine, with sales revenue of 320 million yuan in 2020, accounting for 16% of revenue. Compared with Haitian, Hengshun's dependence on its main products is more obvious.
Hengshun's gross profit margin is several percentage points lower than that of Haitian, coupled with the small scale of revenue, the gross profit amount is less than one-tenth of Haitian.
In 2020, Haitian's gross profit was 9.61 billion yuan, gross profit margin was 42.2%, and Hengshun's gross profit was 820 million yuan and gross profit margin was 40.8%.
In the production cost of Haitian soy sauce, raw materials account for more than 80%, and labor and manufacturing costs account for 2% and 9% respectively. Hengshun vinegar is different - raw materials account for 70%, labor and manufacturing costs account for 9% and 15% respectively, and transportation costs are about 6%.
From the perspective of production costs, the sensitivity of Hengshun vinegar production costs to raw material prices is lower than that of Haitian; the proportion of labor and manufacturing costs is high, which indicates that the vinegar production process is more complicated to a certain extent, which is also the threshold. For example, the proportion of labor costs in the cost of stone statues is usually higher than that of stone tablets.
The investment value of consumer stocks
In the traditional industry, the market demand is stagnant, and it is rare for Haitian Flavor Industry to achieve revenue and net profit to maintain "double-digit" growth. However, soaring valuations have overshadowed the performance - at the end of 2014, Haitian Flavor Industry had a market value of 60 billion yuan and a price-to-earnings ratio of 29 times, and a market value of 650 billion yuan and a price-to-earnings ratio of more than 100 times at the end of 2020; at the end of June 2021, the market value was 543 billion yuan, the price-to-earnings ratio was 77 times, and the price-to-sales ratio was 22 times.
Compared with 2014, revenue and net profit in 2020 increased by 132% and 207% respectively, and the market value increased by 980%.
There is a big gap between the growth and profitability of Hengshun vinegar industry and Haitian, but the stock rally is not to be let go. At the end of June 2021, the market value exceeded 19 billion, and the price-to-earnings ratio and price-to-sales ratio were 75 times and 18 times, respectively.
The stock prices of Haitian Flavor Industry and Hengshun Vinegar Industry deviate from the fundamentals, which has a certain relationship with the "pile-up" of public funds. As of the end of June 2021, 483 public funds held 81.06 million shares of Haitian Flavor Industry, with a market value of 10.4 billion yuan. There are 85 funds holding Hengshun Vinegar.
Public funds not only use real money and silver trays, but also have a great demonstration effect, and there are not a few retail investors who "copy operations".
Haitian Flavor Industry and Hengshun Vinegar Industry are both high-quality consumer stocks, and the performance certainty is relatively high. But the weather is unpredictable, and "certainty" is not the same as "certainty". And in traditional industries such as condiments, the certainty of performance "will not rise" is much higher than that of "will not fall".
A high P/E ratio means risk, and rightly so, a high return. Investors who buy Haitian Flavor Industry and Hengshun Vinegar Industry at a price-earnings ratio of 70 times hope to get 30% of the investment income every year, which is not high, right? However, if the net profit growth rate is 15%. Three years later, the underlying company's share price doubled, net profit increased by 50%, and the price-to-earnings ratio exceeded 100 times.
Although consumer stocks have fallen by a certain extent, they are still at historical highs. The main risk is not a decline in performance, but a performance outperformation of the stock price.
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