Financial News
Written by: Jiang Liqi
2021-07-05 19:43
Last update date: 2021-07-05 19:49
Vitasoy (0345) was involved in the July 1 assassination incident, and the incident continued to ferment.
After being boycotted by mainland netizens and quickly cut off by spokespersons, the latest report was that products were removed from mainland merchants. The company's stock price fell by more than 10% today (5th), and its market value evaporated 3.68 billion yuan.
In the past, many international brands were involved in political turmoil, from D&G, the protagonist of the "Insult to China Gate" incident in the early years, to Nike, adidas, UNIQLO, and Burberry, which were involved in "Xinjiang cotton". "Things have changed"?
Experts believe that the Vitasoy incident is different. There are always too many beverage choices in the mainland, and consumers can drink other brands, which is expected to have a certain impact on its sales; coupled with the increase in Vitasoy’s research and sales expenses, profitability has fallen, and the current price has not It's very attractive.
The stock price of Vitasoy (0345), which was involved in the July 1 assassination case, plunged by 15% today. It still fell 11.7% to close at 25.95 yuan, and its market value lost 3.68 billion yuan in a single day.
Mainland business doubled in 5 years
The response from the market is so enthusiastic, because the mainland business is so important to Vitasoy, it may be affected by the mainland netizens' claims of "sanctions."
Looking at the information, the group's revenue last year reached 7.519 billion yuan, of which 5.008 billion yuan was contributed by the mainland, accounting for 66.6%.
Under the impact of the epidemic, Hong Kong revenue only reached 1.865 billion yuan, down 11.5% year-on-year, but the mainland business revenue still increased by 11%, driving the overall revenue to rise by 4%.
Vitasoy is actively expanding the mainland market, and its business share has increased.
(Photo by Lao Minyi)
Vitasoy, which started in Hong Kong, entered the mainland market as early as the 1990s, but when it comes to actively developing business in the mainland, it has to be counted until 2014.
Vitasoy established branches in Shanghai, Guangzhou, and Shenzhen. In 2014, it invested 500 million yuan to build a new factory in Wuhan, Hubei Province, covering an area of 100,000 square meters (approximately 1.076 million square feet); In 2017, Vitasoy built a production plant in Changping Town, Dongguan City, and invested about 1 billion yuan. The plant has also been put into production as scheduled, and the mainland's territory has been further expanded.
Vitasoy's revenue from its business in the Mainland also increased from RMB 2.4 billion in 2016 to RMB 5.01 billion, and its share of overall revenue rose from 43% to 66.6%.
Operating profit increased from 280 million yuan in 2016 to 520 million yuan.
There are many choices in the mainland beverage market
In the past, many brands have been involved in political turmoil. For example, the recent "Xinjiang Cotton" incident has affected the national sentiment in the Mainland. Brands such as Nike and adidas have been boycotted, but in the end the incident has gradually subsided. Can Vitasoy be able to "change the situation"?
Chen Sichao, assistant vice president of Guotai Junan International, said bluntly that it depends on how the company handles the crisis. "The Vitasoy incident continues to ferment, which will affect its sales in the mainland and also hit the expansion of mainland business. It still depends on how the company will deal with it in the future."
Chen Sichao continued that Vitasoy is highly competitive in the Mainland, and it is difficult to use the "Xinjiang Cotton" incident as a reference.
"Vitasoy is highly competitive in the Mainland. There are other branded beverages such as soy milk and lemon tea on the market. Consumers have more choices. Therefore, this incident is expected to have some impact on the growth of Vitasoy's revenue."
Vitasoy needs to invest a lot of money for marketing, promotion, and research and development of new products.
(Profile picture)
Large marketing and promotion expenses
According to Bloomberg data, Vitasoy's average price-to-earnings ratio in the past five years is as high as 40 times. Even if it has been dragged down by political events recently, its valuation is still as high as 50 times, and its predicted price-to-earnings ratio is 39.9 times. .
Chen Sichao explained that Vitasoy is a well-known soy milk beverage brand and enjoys a leading position in the plant-based soy milk market. Moreover, the brand has been operating well and the market has expectations for its prospects, so it has always had a high valuation.
However, in recent years, the Group has expanded its presence in the Mainland, and has also invested a lot of expenditure for marketing, promotion, and product research and development. There has been a situation of "growth but not profit". "Vitasoy continues to invest resources in marketing and promotion of products in the Mainland. Development and the increasing emphasis on new retail and online businesses, associated with huge expenditures, have also put pressure on its profitability."
Vitasoy’s revenue recorded 7.519 billion yuan, an increase of 4% year-on-year; annual net profit reached 548 million yuan, an increase of 2% year-on-year; but excluding relevant government subsidies, operating profit fell by 11%.
In the past 5 years, Vitasoy's gross profit margin has ranged from 52 to 53%.
The expected increase in raw material prices, such as soybeans and sugar, Chen Sichao also believes that Vitasoy's gross profit margin will be under pressure.
High valuation
In the post-epidemic period, as the mainland market and various economic restrictions begin to relax, Vitasoy's business is expected to gradually return to the growth track, but it is expected to support the current valuation. Chen Sichao said: "Vitasoy's forecast revenue for fiscal year 2022 is expected With a growth of 11%, profits are expected to reach high single-digit growth. Since its revenue and profit growth rate is not high, its current valuation is also considered high.” Therefore, only a neutral rating is given, and the current price is not particularly attractive.
July 1st Assassination of Police | News refers to Vitasoy's internal circulation to inform the Hong Kong Director of Human Resources to resign
July 1st assassination case | Vitasoy drops nearly 15% in market value evaporating 4.6 billion, rumored to be removed by mainland merchants
July 1st Assassination of Police | More than 60% of Vitasoy’s revenue comes from China, if “sanctions” may affect its business
Vitasoy
