When you are tired and sleepy, you drink Dongpeng special drink.
Back then, Dongpeng Special Drink successfully seized the Red Bull market and became a new upstart in the beverage industry by virtue of the two classic advertisements of "you have to be awake and fight when you are young" and "if you are tired and sleepy, you will drink Dongpeng Special Drink", coupled with the differentiation of prices.
In 2023, Dongpeng Beverage's revenue and net profit will continue to maintain double-digit high-quality growth, both in the food and beverage industry and the entire A-share market.
In the past year, the A-share large consumption board has fallen into the mud and sand, and the segment track leader Dongpeng Beverage can maintain a high performance growth rate must have its unique advantages.
So, what is ROE and why is it important?
ROE, also known as return on equity or return on shareholders' equity, is the ratio of net profit to shareholders' equity, reflecting how much net profit the company can bring to shareholders for every 1 yuan they invest.
Warren Buffett once said that ROE is the most important indicator to measure a company's operating performance. The higher the ROE, the stronger the company's profitability, and if a company's ROE is greater than 20% for many consecutive years, it is very good.
In the soft drink industry, Dongpeng Beverage is the only company with an ROE of more than 30% for five consecutive years, and its profitability is also continuing to increase. What's even more surprising is that in 2023, Dongpeng Beverage's ROE will be higher than Moutai's 34.19%.
So, how is Dongpeng Beverage's ROE growing?
ROE can be turned into the product of the three indicators of net profit margin on sales, total asset turnover, and equity multiplier through DuPont teardown, thus helping us find the reason for its continued growth.
Among them, the net profit margin on sales reflects the profitability of the company's products or services, the total asset turnover ratio reflects the operating ability of the company's management, and the equity multiplier reflects the financial leverage level of the enterprise.
Through disassembly, we can divide the ROE change of Dongpeng Beverage into two stages.
The first stage was pre-IPO, where ROE decreased from 43.14% in 2019 to 36.48% in 2021, mainly due to the increase in the company's total assets due to the company's IPO in 2021.
The second stage is after listing, from 36.48% in 2021 to 35.82% in 2023, during which the equity multiplier and net profit margin on sales generally showed an overall growth trend, and the total asset turnover ratio continued to decline.
1. First of all, let's take a look at the changes in sales net profit margin, by comparing with Chengde Lulu, Li Ziyuan and Happy Home in the same industry, we can see that Dongpeng Beverage's sales net profit margin is not bad, and it has maintained a growth trend from 2019 to 2023, while Chengde Lulu's net profit margin has continued to decline since 2020.
The net profit margin of sales is affected by the gross profit margin of sales and the expense ratio of the period, and from the perspective of a single company of Dongpeng Beverage, the gross profit margin of sales and the expense ratio of the period from 2019 to 2023 have shown a downward trend, mainly due to the continuous growth and large increase in operating income.
In 2023, Dongpeng Beverage's revenue will exceed 10 billion yuan for the first time, of which the revenue of Dongpeng Special Drink, a large single product, will account for 91.87%. In addition, Dongpeng Special Drink's sales volume in China's energy drink market increased from 36.70% in 2022 to 43.02%, ranking first.
However, Dongpeng Beverage relies heavily on energy drinks, and the company is also actively looking for a second growth curve, launching coffee drinks, electrolyte drinks, tea drinks, room temperature citrus juice and other products, and is committed to creating a diversified product matrix based on "energy +".
With the continuous increase in the volume of new products, the scale effect is gradually amplified, and the company's profitability is expected to be further improved by reducing costs and increasing efficiency with good cost control and digital operation.
More specifically, the change in the selling expense ratio was in line with the net profit margin, which increased by about five percentage points from 13.56% in 2019 to 18.11% in 2023, while the selling expense ratio decreased by exactly five percentage points during the period.
In 2023, the number of distributors who maintain stable cooperation with Dongpeng Beverage will increase from 2,779 to 2,981, covering all prefecture-level cities in the country, and the number of active terminal sales outlets of Dongpeng Beverage will increase to more than 3.4 million.
2. Next, let's take a look at the changes in the equity multiplier, by comparing with other companies in the same industry, we can see that Dongpeng Beverage's debt ratio is very high, with a debt ratio of more than 57% in 2022 and 2023.
However, it is worth mentioning that due to the increase in the prepayment of distributors year by year, Dongpeng Beverage's contract liabilities have increased year by year, from 950.3 million in 2020 to 2.607 billion in 2023, indicating that the downstream market has a large demand for the company's products, high popularity, and strong competitiveness.
This has also led to downstream underwriters intending to pay for goods in advance or sign more contracts to ensure product supply, which is also a sign that Dongpeng Beverage enjoys a high position in the industry.
However, the contract liability will exaggerate the performance of the overall asset-liability ratio to a certain extent, it is not money, but the delivery of products, and the increase in the debt ratio caused by it is virtual, so this high asset-liability ratio does not mean that its short-term solvency is further pressured.
In fact, Dongpeng Beverage is not too short of money, in 2023, the company's load will total 8.386 billion, including short-term loans of 2.996 billion and long-term loans of 220 million, but the monetary funds in the same period are 6.058 billion.
3. Finally, let's take a look at the total asset turnover ratio, which has been declining from 2019 to 2023, and remains at about 0.85 after listing, which is not much different from other companies in the industry.
Let's take a look at the inventory turnover days, Dongpeng Beverage's inventory turnover days are at a low level in the industry, maintained at 26-28 days, indicating that the inventory management efficiency is high, and the growth of Dongpeng Beverage is not to press the goods to distributors, but to sell them to end consumers, which reduces the time for inventory to occupy funds, and also reduces the risk of excessive inventory backlog.
Finally, to sum up, Dongpeng Beverage, as a leader in the beverage industry, focuses on bottled specialty drinks to consolidate its leading position, while strengthening the multi-product matrix, relying on a strong omni-channel layout, its performance is expected to continue to grow.
The above analysis does not constitute specific trading advice, the stock market is risky, and investment should be cautious.
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