Author/wordless
Produced by/New Pick Business Review
The annual 618 shopping festival came to an end, and Blue Moon delivered a dazzling answer.
According to the Douyin 618 Good Things Festival List, Blue Moon ranks TOP 1 in the cumulative sales list of the industry on the 618 Good Things Festival Clothing Cleaning List in Douyin Mall. In the 618 Super Brand Day event of Douyin Mall, Blue Moon's sales exceeded 270 million yuan, of which Blue Moon Supreme sold more than 100 million yuan.
Source: Baidu
However, the capital market has reacted lukewarmly to these bright results. At present, Blue Moon's share price is HK$2.11 per share, down 6.22% from the stage high of around HK$2.25 per share in mid-May.
This is largely due to the fact that investors do not believe that a single shopping festival can rewrite the reality that Blue Moon's performance is under pressure. In the past few years, Blue Moon's revenue and net profit have struggled to rise steadily, and the company's net profit margin has also shrunk significantly due to high selling expenses.
Considering that during the shopping festival, companies need to make a big announcement to attract consumers, in addition to the outstanding performance, Blue Moon's sales expenses may soar, and profit margins may also be further narrowed. Investors will naturally be cautious about a blue moon.
1. Performance and stock price both declined, and the blue moon became a "dark moon"
When it comes to blue moon, many people may think of laundry detergent at the first time. This is no accident, because Blue Moon not only started with laundry detergent, but also the most important revenue pillar at present, which is also the laundry cleaning and care business. In the past few years, the revenue proportion of Blue Moon clothing cleaning and care products has been maintained at about 90%.
Specializing in clothing cleaning and care products, although Blue Moon has become a giant in the vertical track, the slowdown in related market demand has also put Blue Moon's performance under high pressure.
According to the financial report, from 2018 to 2020, the revenue of Blue Moon clothing cleaning and care products was HK $5.917 billion, HK $6.178 billion and HK $5.596 billion respectively, a year-on-year increase of 20.22%, 4.41% and a decrease of 9.42% respectively.
It is not difficult to find that after 2019, the revenue growth rate of Blue Moon clothing cleaning and care products has gradually declined, and it will even fall into the quagmire of negative growth in 2020.
Source: Blue Moon's 2021 financial report
However, fortunately, during the epidemic period, consumers paid more attention to personal health care, and Blue Moon also ushered in a respite. According to the financial report, from 2021 to 2022, the revenue of Blue Moon clothing cleaning and care products will be 6.457 billion yuan and 6.821 billion yuan respectively, a year-on-year increase of 15.39% and 5.64% respectively.
Overall, Blue Moon's performance has also climbed steadily, with revenue of HK$7.597 billion and HK$7.947 billion from 2021 to 2022, a year-on-year increase of 8.6% and 4.6%, respectively.
Source: Blue Moon's 2023 financial report
However, the pandemic cannot last forever. Since 2023, as the epidemic gradually dissipates, Blue Moon's performance has declined again. According to the financial report, in 2023, the revenue of Blue Moon clothing cleaning and care products will be HK $6.501 billion, a year-on-year decrease of 4.69%, and the total revenue will be HK $7.324 billion, a year-on-year decrease of 7.84%.
In fact, the capital market has long seen that the blue moon is exhausted, so it has begun to vote with its feet. At the beginning of its listing in 2020, Blue Moon's share price soared to a high of HK$19.16 per share, and its market value exceeded the HK$100 billion mark. However, after 2021, Blue Moon's share price has fallen head-on, and it is currently only HK$2.11 per share, down 88.99% from its high point.
Second, sales expenses accounted for nearly half, and Blue Moon profits were eaten up
In the face of the dilemma of the performance of core products stalling, Blue Moon is not indifferent, but continues to increase publicity and distribution, trying to attract more consumers through advertising.
Source: Blue Moon's 2023 financial report
According to the financial report, from 2021 to 2023, Blue Moon's sales and distribution expenses will be HK $2.392 billion, HK $2.651 billion and HK $3.244 billion respectively, a year-on-year increase of 18.59%, 10.83% and 22.37% respectively, and the proportion of revenue will be as high as 31.49%, 33.36% and 44.29% respectively, an increase of 12.8 percentage points in three years.
Although Blue Moon is gradually increasing its publicity efforts, its main sales channels are either sluggish or sluggish.
According to the financial report, Blue Moon currently has three major channels: online and offline distributors and direct sales to large customers. In 2023, Blue Moon's offline distributors' revenue will be HK $2.755 billion, down 15.3% year-on-year; revenue from direct sales to major customers decreased by 18.5% year-on-year to HK$763 million. Online sales revenue was HK$3.805 billion, a year-on-year increase of 1.3%.
This also shows from the side that although Blue Moon can deliver dazzling battle reports during shopping festivals such as Double 11 and 618, it does not help much for the overall performance of online channels.
Although most of Blue Moon's channel performance has hit a bottleneck and it is difficult to achieve a greater degree of scale effect, because it has become an industry leader and has launched a number of high-end laundry detergent products in the past few years, Blue Moon's profit margins at the product level are actually not low. According to the financial report, from 2021 to 2023, Blue Moon's gross profit margin will be 58.42%, 57.8% and 62.0% respectively.
However, unfortunately, because the growth rate of Blue Moon's sales expenses far exceeds the growth rate of revenue from various channels, the company's profit margins are still gradually narrowing.
Source: Blue Moon's 2023 financial report
From 2021 to 2023, Blue Moon's net profit will be HK $1.014 billion, HK $611 million, and HK $325 million respectively, down 22.53%, 39.73%, and 46.81% year-on-year, respectively. During the same period, Blue Moon's net profit margin was 13.35%, 7.69% and 4.44% respectively. If this trend continues, there is even a risk that Blue Moon will lose money in the future.
Third, the large dividends but stingy research and development, blue moon is difficult to have imagination
Generally speaking, the decline in the revenue-generating efficiency of large-scale marketing strategies means that industry dividends are narrowing and competition is intensifying, and enterprises need to increase R&D investment, capture consumers with differentiated high-tech, and open up growth space.
However, Blue Moon's R&D efforts are very limited. According to the financial report, the 220 million yuan obtained from Blue Moon's planned listing and fundraising will be used for research and development, and from 2021 to 2023, it will use HK $43 million, HK $36 million and HK $52 million respectively, which is not worth mentioning compared with the sales expenses of billions of Hong Kong dollars.
R&D investment is limited, which determines the company's lack of technology. As of the end of 2023, Blue Moon only has 335 patents, including only dozens of invention patents. Lacking cutting-edge technology, Blue Moon's high-end products are naturally difficult to convince consumers to pay and help the company broaden its profit margins.
If Blue Moon's "light marketing, light R&D" is only a problem with the macro strategy in the case of limited funds, then using profits to dividends and not investing in R&D shows that Blue Moon's management is extremely short-sighted.
According to the prospectus, on the eve of listing, Blue Moon Group paid a dividend of HK $2.3 billion to the sole shareholder Aswann. Blue Moon founders Luo Qiuping and Pan Dong hold a total of 88.92% of Aswann's shares. A simple calculation shows that the two took a total of about HK $2.05 billion in dividends.
However, at the beginning of the listing, Blue Moon was hungry to raise HK$9.576 billion. In the context of such a lack of money, Blue Moon Surprise Dividends obviously hopes to make investors "pick-up heroes".
Source: Blue Moon's 2023 financial report
In 2023, despite only creating a net profit of HK $325 million and plummeting by 46.81% year-on-year, Blue Moon still paid a generous dividend of HK $334 million, exceeding the net profit of the year.
Against the backdrop of pressure on the company's performance, executives do not convert most of their net profits into R&D expenses, but instead pay large dividends, seemingly because they are not hopeful about the company's long-term vitality.
This may also determine that although Blue Moon is still the leading player in the field of clothing cleaning and care, as other more powerful opponents make efforts, it will be more and more difficult for Blue Moon to hold the fundamentals, and its performance will continue to be sluggish.
Against this backdrop, Blue Moon's share price will naturally continue to decline.