Source of this article: Times Finance Author: Contributing author Huang Zidong
"The first share of live broadcast e-commerce" Yuanwang Technology (002291. SZ) has entered the lowest period of stock price in the past five years.
Yuanwang Technology, formerly known as Saturday, is a company in Foshan that mainly sells women's shoes. In March 2019, Saturday acquired 88.5651% equity interest in Hangzhou Yuanwang Network Co., Ltd. (hereinafter referred to as "Yuanwang Network") for a consideration of RMB 1.77 billion through cash and additional share issuance. In December 2019, Saturday opened a trend of 17 daily limits in 26 days, and the stock price soared from four or five yuan to a record high of 36.56 yuan per share, which was called a "demon stock" by investors.
But five years later, Yuanwang Technology has returned to the original point. Since the beginning of this year, the share price of Yuanwang Technology has fallen by more than 50%, the market value has evaporated by more than 4 billion yuan, and the lowest share price has fallen to 4.06 yuan per share. At the close of trading on July 1, Yuanwang Technology closed at 4.34 yuan per share, with a total market value of about 4 billion yuan.
Yuanwang Network merged Saturday in 2019, and since then, it has gradually divested its women's shoes business and transformed it into an Internet comprehensive marketing platform focusing on advertising and traffic operation, and has been constantly labeled as "Internet celebrity economy concept stock" and "the first share of live broadcast e-commerce". In 2022, Saturday officially changed its name to Yuanwang Technology.
Judging from the current situation, it is difficult to say that the capital operation of Yuanwang Technology is smooth. In the past five years, major shareholders have frequently reduced their holdings and their financial reports have been questioned by regulators, all of which have put Yuanwang Technology on the cusp.
Wind data shows that from 2021 to the present, Zhang Zemin, the founder and major shareholder of Saturday, has reduced his holdings by nearly 40 million shares through Foshan Zhaozhilong Enterprise Management Co., Ltd. (hereinafter referred to as "Foshan Zhaozhilong", formerly known as Yunnan Zhaolong), and as of the first quarter of 2024, his shareholding ratio has decreased from 11.93% to 5.55%, from the former largest shareholder to the third largest shareholder. In 2023 alone, Foshan Zhaozhilong will reduce its holdings as many as five times, and Xie Rudong (founder of Yuanwang Network and current chairman of the company) also cashed out 267 million yuan through block transactions last year.
In addition to the sell-off of major shareholders, investment institutions are also leaving.
According to Wind data, at the end of 2023, the number of Yuanwang Technology institutions held 26 positions (combined with institutional shareholders), while as of the end of the first quarter of 2024, the number of all institutional holdings was only 7. In addition to the LYONE GROUP PTE. controlled by the Zhang Zemin family. LTD and Foshan Zhaozhilong, only the fourth largest shareholder, Galaxy Derui Capital Management Co., Ltd., holds more than 10 million shares, 21.38 million shares, with a shareholding ratio of 2.44%.
Of the 21 funds (including social security funds) that will hold shares in Yuanwang Technology at the end of 2023, only 1 GF Fund will be left in the first quarter of 2024, and it will reduce its holdings by 1.2712 million shares. At the end of 2023, the 17021 portfolio of the National Social Security Fund, which holds 4.9264 million shares, the Southern Fund with 2.1732 million shares, and the Penghua Fund, which holds 1.2803 million shares, have completely withdrawn.
However, since the beginning of this year, the northbound funds represented by the Hong Kong Securities Clearing Co., Ltd. have increased their holdings significantly, increasing their holdings from 0.54% at the end of 2023 to 2.61% at the end of the first quarter of 2024, and Chinese Life has newly held 3.8482 million shares.
Source: Wind
On May 26, Yuanwang Technology received the 6th annual report inquiry letter after consolidation, and the regulator raised questions on a total of 8 aspects, such as operating income, net profit, cash flow from operating activities, and customer-supplier relations. However, Yuanwang Technology was delayed twice and replied after 23 days, and during the period of delayed reply, the share price of Yuanwang Technology fell by more than 18%.
The loss was the main reason for the questioning. According to public data, the GMV of Yuanwang Technology in 2021 will be about 10.2 billion yuan, and in 2022 it will reach 15 billion yuan, and in 2023, it will only announce that the GMV in the first half of the year will be about 6 billion yuan, and the GMV in the first quarter of 2024 will be 4.5 billion yuan. But behind the scenery data is a huge loss, and in 2023, the loss of Yuanwang Technology will be as high as 1.05 billion yuan. According to the statistics of Times Finance, Yuanwang Technology has suffered a cumulative loss of 2.013 billion yuan in the past three years.
Yuanwang Technology, which is sitting on tens of billions of GMV, why is it mired in losses? Times Finance sent an interview email to the secretary of the board of directors of Yuanwang Technology on issues such as the departure of investment institutions, whether there is a share repurchase plan, whether it will completely divest the footwear business, the market environment and competitive situation of the live broadcast industry, etc., but has not received a reply as of press time.
"The first share of live e-commerce" is still trapped in selling shoes?
Times Finance flipped through the previous announcement, since the injection of Yuanwang Network into listed companies, Yuanwang Technology has received financial report inquiry letters from the Shenzhen Stock Exchange 6 times after releasing the 2019 annual report, 2020 semi-annual report, 2020 annual report, 2021 annual report, 2022 annual report, and 2023 annual report. In addition, in December 2023, the Guangdong Securities Regulatory Bureau issued the "Decision on Issuing Warning Letters to Foshan Yuanwang Technology Co., Ltd., Yu Hongtao, Xie Rudong, Li Gang, He Jianfeng, and Ma Chao" to Yuanwang Technology on inflated revenue and profits, information disclosure violations, and shareholder reduction.
According to the 2023 annual report, Yuanwang Technology achieved revenue of 4.777 billion yuan, a year-on-year increase of 22.48%; The net profit attributable to shareholders of listed companies was -1.050 billion yuan, a year-on-year decrease of 299.33%. This is the third consecutive year that Yuanwang Technology has suffered a large loss, and the loss is a new high in the past three years.
Source: Straight flush
In response to the 2023 annual report, the Shenzhen Stock Exchange asked Yuanwang Technology to explain in detail the reasons and reasonableness of the large loss in net profit while the operating income increased.
Yuanwang Technology explained that it was due to the company's overly optimistic judgment of the consumption environment and market environment and the decline in efficiency in the process of business expansion, coupled with the impairment of various assets that had been accrued, resulting in a large loss of the company's net profit.
In addition, the company's main business gross profit margin is too low is also the main reason. According to the reply letter, the company's comprehensive gross profit margin in 2023 will only be 2.05%, which is a large decline compared with 2022. In terms of apparel and footwear business, although Yuanwang Technology has strengthened its clearance efforts and increased its operating income, its gross profit margin has decreased from 31.36% in 2022 to 10.78%.
Secondly, the company's Internet advertising business, which has the highest operating income, will reach 2.254 billion yuan in 2023, a year-on-year increase of 101.58%, accounting for 51.60%. According to the reply letter, the revenue of Internet advertising business mainly comes from Internet advertising agency business and social e-commerce business in the new media advertising category. However, due to the low level of gross profit margin of the Internet advertising agency business, the overall gross profit margin of the Internet advertising business has been lowered.
Yuanwang Technology also attributed its dismal performance to the unsatisfactory environment in 2023. According to the reply letter, Yuanwang Technology has achieved good results after increasing the internal adjustment of its anchor live broadcast matrix account and increasing the number of live broadcasts in the first quarter of 2024.
In the first quarter of 2024, the operating income of Yuanwang Technology will be 1.581 billion yuan, an increase of 43.44% over the same period, of which the revenue of social e-commerce has reached 790 million yuan, an increase of 80.09% compared with the first quarter of 2023, and the gross profit margin has reached 12.34%, which is significantly higher than the gross profit margin of 0.38% of social e-commerce in the whole year of 2023. Yuanwang Technology predicts that the comprehensive gross profit margin in 2024 will be 14.4%, the overall operating cost is predicted to be 4.783 billion yuan, and the overall operating income is predicted to be 5.588 billion yuan, and the future performance is not expected to continue to deteriorate.
The large amount of receivables and bad debts, customers/suppliers, etc., which appeared in the annual report of Yuanwang Technology, were also questioned by the Shenzhen Stock Exchange.
According to the annual report of Yuanwang Technology, at the end of the reporting period, the company's accounts receivable balance reached 1.52 billion yuan, and the company has made a provision for bad debts of 505 million yuan, and the new provision for bad debts in the current period is as high as 318 million yuan, a year-on-year increase of 221.21%. Among them, the accounts receivable of Hangzhou Hongzhen Commercial Co., Ltd. (hereinafter referred to as "Hangzhou Hongzhen") and Hangzhou Honghua Commercial Co., Ltd. (hereinafter referred to as "Hangzhou Honghua") have accumulated bad debt provisions of 375 million yuan.
It is understood that Hangzhou Hongzhen and Hangzhou Honghua Co., Ltd. invested in the establishment of joint ventures in 2019, and both companies were established after the acquisition of Yuanwang Network. In addition to these two, Hangzhou Xinyi Commercial Co., Ltd. (hereinafter referred to as "Hangzhou Xinyi"), which was not mentioned in the letter of inquiry. The above three companies are all related to Yuanwang, and they are all major customers of Yuanwang Technology, with a cumulative balance of receivables of 626 million yuan at the end of 2023.
In this regard, Yuanwang Technology explained that Hangzhou Hongzhen, Hangzhou Honghua and Hangzhou Xinyi began to operate and undertake the company's footwear business in October 2019, and the market began to change at the beginning of 2020, especially the business of the main channel is basically offline physical stores, and a large number of store closures have caused a gradual decline in sales collection in recent years, and a trough in 2023.
It can be seen that the financial situation of Yuanwang Technology is still affected by the legacy of the "Saturday" footwear business. Yuanwang Technology also said that in 2023, the company will accelerate the clean-up of the footwear business, resulting in a certain loss. According to the 2023 annual report, the revenue of Yuanwang Technology's clothing and footwear industry accounted for only 8.37%, but the amount of bad debts related to the footwear business was as high as 276 million yuan.
Guojin Securities Research Report pointed out that with the reduction of the number of footwear inventory and the improvement of the inventory age structure, it is expected that the impact of the footwear business on the company's performance will be further reduced.
Nearly sixty percent of the income is spent on investment?
In addition, the sales/procurement concentration and changes of the top five customers and suppliers of Yuanwang Technology have also attracted the attention of the Shenzhen Stock Exchange.
With the rapid growth of Douyin, the company's largest customer has also "changed the dynasty", and in May 2022, after the company became a first-class agent of Douyin, the scale of new media advertising business from the short video platform, especially the Douyin platform, has been able to achieve greater growth. Therefore, four of the top five customers in 2023 are Internet advertising customers, and the proportion of sales revenue has increased compared with 2021 and 2022.
In terms of suppliers, the previous 2023 annual report showed that the largest supplier of Yuanwang Technology was Beijing Douyin Information Service Co., Ltd. Before May 2022, the company's traffic purchase on the Douyin platform was mainly purchased through other advertising agencies, and then began to directly cooperate with the Douyin platform for traffic purchase, although the cost of purchasing traffic on the Douyin platform has increased significantly compared with other advertising agencies, but this will not prevent this company with a considerable status in the field of live broadcast from burning money to invest in streams.
In 2023, Yuanwang Technology will purchase 2.304 billion yuan from Beijing Douyin Information Service Co., Ltd., accounting for 53.87% of the total annual procurement, and the specific content is for the purchase of platform traffic, while in 2022, it will only be 976 million yuan, accounting for 32.71%. In addition, the announcement of the reply to the inquiry letter of Yuanwang Technology shows that the procurement projects of its top two suppliers are all flow procurement, and the total annual procurement of the two is 2.525 billion yuan, accounting for 59.06%. Compared with its operating income of 4.777 billion yuan in 2023, this means that Yuanwang Technology has spent at least nearly sixty percent of its annual revenue on investment.
Source: Yuanwang Technology Inquiry Letter Reply Announcement
Yuanwang Technology explained in the reply letter that the company uses the public domain traffic delivery tool opened by the Douyin platform to purchase and deliver traffic, which can be promoted and drained in the live broadcast room on the Douyin platform, increase the audience of the live broadcast room, and ultimately promote the increase of sales in the live broadcast room.
It is worth mentioning that the announcement of Yuanwang Technology's reply letter coincides with the end of this 618 promotion. According to Sina Technology, Jia Nailiang, a signed artist under Yuanwang Technology, led the sales of goods on Douyin, not only surpassing Brother Hui and Crazy Brother Yang, but also topped the monthly list in one fell swoop, and sat firmly in the position of Douyin's new "first brother with goods".
According to the data of Cicada Mother, during the entire 618 period, Jia Nailiang ranked second in the sales list, second only to the Guangdong couple under Wuwu Media.
Source: Mother Cicada
According to Feigua data, on May 21, Jia Nailiang's first 618 live broadcast achieved a GMV of more than 100 million in only three hours, and the all-day sales reached double that of 618 last year. In the list of Douyin goods in May, Jia Nailiang ranked first with sales of 707 million yuan, ending the previous monthly "two consecutive championships" of "Walking with Hui".
In 618 this year, a total of 153 anchors from Yuanwang Technology participated in the promotion, bringing 30,000 products, and the overall live broadcast duration reached 6,054 hours. In addition to Jia Nailiang, many live broadcast rooms of Yuanwang Technology frequently exceeded 100 million times, and the number of more than 10 million games reached more than a dozen. Regarding the overall GMV of 618, a relevant person from Yuanwang Technology once told a reporter from Times Weekly that the company may release relevant data after statistics.
Although the results are outstanding, due to the rising traffic costs, the profitability of Yuanwang Technology's live broadcast business has plummeted. In fact, entering 2024, Yuanwang Technology's profitability has not improved significantly. In the first quarter of 2024, the net profit attributable to the parent company of Yuanwang Technology will be -94 million yuan, with a year-on-year increase of 147.37%.
"Maybe it's going too fast"
"2023 will be a challenging year for the company", Yuanwang Technology responded in the phased business summary of the reply letter. In the face of the rapid iteration of the live broadcast industry, Xie Rudong recently mentioned in an interview with Jiemian News that offline business is the company's next level.
Source: Yuanwang Technology's official public account
In December 2023, the "Yuanwang X27 PARK" theme park opened in Linping, Hangzhou, which is the country's first "online + offline" new consumption model commercial complex built by Yuanwang Technology, with a construction area of about 260,000 square meters and about 350 stores.
According to the reply letter, in 2023, the company will increase the salary of employees for the X27 PARK project by 20.73 million yuan, and the opening publicity expenses will cost 7 million, and the total cost of preparing for the opening and the use of water and electricity for decoration preparation will be about 13.3 million.
Source: Yuanwang Technology Inquiry Letter Reply Announcement
Despite this, Xie Rudong is confident in the business model: "The company plans to open about 20 X27 series commercial outlets in Hangzhou in the second half of the year, with a scale of 1,000 to 2,000 square meters, and try community delivery services, and at the same time, the X27 project will be expanded to other cities." ”
A senior Douyin e-commerce operator told Times Finance that the cost of investing in the construction of shopping malls is very large, "I feel that the business model of Yuanwang Technology is becoming more and more complex and comprehensive, including that they also have cooperation in variety shows." ”
Focusing on its core IP, Yuanwang Technology is also in the layout of diversified businesses such as short drama customization, star variety shows and grass planting. Xie Rudong said that the company is not only limited to live streaming, but also is committed to becoming a fully managed service platform for brands, covering shelf e-commerce and private domain e-commerce. The brand only needs to provide products, from product promotion to sales, and even expand overseas markets, Yuanwang Technology can do it all by hand.
In the first half of this year, Yuanwang Technology laid out its overseas business, and North America became the company's first test area. At present, Yuanwang Technology has set up a Tik Tok live broadcast team and set a new record for Tik Tok's single sales in North America. According to the reply letter, Yuanwang Technology entered the first year of international layout, carried out global traceability live broadcast, and established an overseas live broadcast team.
Yuanwang Technology has made a lot of attempts around "live broadcasting", but as a listed company, the cost of trial and error of Yuanwang Technology is limited. "Maybe it's going too fast, and many managers don't really know the whole picture of the company," Xie Rudong said in an interview with the media.
At present, the dividend period of the live broadcast industry has passed, and the big anchors are also facing the challenges of GMV decline and profit decline.