Gujing Gong Jiu is still hovering at the bottom.

On July 23, Gujing Gong Jiu's stock price closed at 188.99 yuan per share, plummeting 6.96% that day, almost ranking at the bottom in the baijiu sector.

It is reported that on May 6, Gujing Gong Jiu's stock price once rose to 282.74 yuan; now, in less than 3 months, the stock price has fallen by 30%, and its market value has shrunk by about 50 billion yuan.

From the news perspective, there have been no sudden incidents for Gujing Gong Jiu recently, and the interim report has not been disclosed in advance, so the reason for the stock price decline remains unclear.

In recent years, Gujing Gong Jiu has surged like a dark horse in the industry, with its revenue successfully breaking the 20 billion yuan mark in 2023, performing quite impressively. However, despite the rapid revenue growth, financial reports also reveal issues such as soaring sales expenses, a sharp increase in inventory, and overcapacity this year.

Behind the "Surge"

There is a saying in the baijiu circle: "Don't enter Sichuan from the west, don't enter Anhui from the east."

This refers to Sichuan and Anhui, two provinces known for producing famous liquors, with Gujing Gong Jiu being one of the representatives of Anhui's famous liquors.

Over the past few years, Gujing Gong Jiu has achieved rapid development as a dark horse. Just looking at the revenue data, in 2023, Gujing Gong Jiu achieved revenue of 20.25 billion yuan, successfully surpassing the 20 billion yuan mark; in 2019, its revenue was only 10.42 billion yuan.

In other words, in just 4 years, Gujing Gong Jiu's revenue has nearly doubled, a growth rate that stands out even in the entire brewing sector.

Driven by rapid revenue growth, Gujing Gong Jiu's stock performance has also been quite impressive. From an annual perspective, since 2019, Gujing Gong Jiu's stock price has surged by 375%, far outperforming the sector's 44% increase.

However, behind the high revenue growth, multiple indicators such as inventory, notes receivable, and accounts receivable are under significant pressure.

First, regarding inventory. According to financial reports, as of the first quarter of this year, Gujing Gong Jiu's inventory was 7.573 billion yuan, with total current assets of 30.11 billion yuan, making inventory account for 25.13% of current assets; in the first quarter of 2019, Gujing Gong Jiu's inventory was 2.352 billion yuan, meaning that in 4 years, inventory has more than tripled.

Next, regarding notes receivable and accounts receivable. Generally, these reflect the enthusiasm of distributors. As of the first quarter of this year, Gujing Gong Jiu's notes receivable and accounts receivable were 68.61 million yuan, while in 2019, they were as high as 1.842 billion yuan. The current figure is just a fraction of what it was back then.

At present, like most liquor companies, Gujing Gong Jiu is also stuck in the difficult situation of "poor sales and high inventory."

However, compared to other baijiu companies, Gujing Gong Jiu may face greater pressure because, in recent years, while expanding, it has also been continuously increasing production capacity.

In 2020, Gujing Gong Jiu announced a private placement plan to raise no more than 5 billion yuan for technological transformation projects. This placement was completed in July 2021, raising a total of 5 billion yuan. The funds were used for the previously disclosed technological transformation projects. According to the announcement, the total investment in Gujing Gong Jiu's technological transformation projects reached 8.924 billion yuan. Upon completion, the annual output of raw liquor would be 66,600 tons, equivalent to a 71% increase from the 2019 production level.

From the financial reports, as of the first quarter of this year, Gujing Gong Jiu's fixed assets and construction in progress were 4.596 billion yuan and 3.158 billion yuan, respectively, totaling 7.754 billion yuan; in 2019, fixed assets and construction in progress were 1.723 billion yuan and 184 million yuan, respectively, totaling 1.907 billion yuan. The comparison clearly shows that Gujing Gong Jiu's production capacity has grown "explosively" in recent years, and this capacity will become a "burden" in the future.

How Long Can the "Surge" Continue?

At the 2023 Gujing Gong Jiu Global Distributors Conference, the company set a goal of "achieving 24 billion yuan in revenue in 2024 and 30 billion yuan in 2025."

If this revenue target is truly achieved, there is no doubt that Gujing Gong Jiu will face no major issues in either performance or stock price in the next two years. However, it is worth considering whether such a revenue target is achievable against the backdrop of an overall industry downturn. The answer is clearly uncertain.

In fact, it is already quite difficult for Gujing Gong Jiu to maintain high growth.

From the first-quarter report, Gujing Gong Jiu's sales expenses in the first quarter were as high as 2.252 billion yuan, with total operating costs of 5.47 billion yuan, making sales expenses account for 41.17% of total operating costs. It is worth noting that in 2019, Gujing Gong Jiu's annual sales expenses were 3.185 billion yuan; now, one quarter's expenses almost match the entire year's.

The massive sales expenses also have a significant impact on Gujing Gong Jiu's profit margin.

In the first quarter, Gujing Gong Jiu's gross margin was 80.35%, but its net margin was only 25.65%. Of course, compared to previous quarters, the profit margin data for this quarter has improved significantly. However, compared to peers, Yanghe Co., Ltd.'s gross margin in the first quarter was 76.03%, with a net margin of 37.24%; Shanxi Xinghuacun Fen Wine Factory Co., Ltd.'s gross margin was 77.46%, with a net margin of 40.86%; and Luzhou Laojiao Co., Ltd.'s gross margin was 88.37%, with a net margin of 49.83%.

Gujing Gong Jiu's profit margin, especially its net margin, is the lowest among these liquor companies.

Of course, it cannot be ruled out that Gujing Gong Jiu may further increase marketing expenses to pursue high growth. However, such high growth is clearly "unhealthy" and unsustainable.

In addition to marketing expenses reaching very high levels, the slow progress of nationalization also restricts Gujing Gong Jiu's further development.

According to media analysis, as of mid-2023, Gujing Gong Jiu's revenue from Central China, centered around Anhui and Hubei, accounted for 86.49%, still occupying an absolute core position. In terms of regional distribution of distributors, Gujing Gong Jiu had a total of 4,341 distributors, with 2,649 in Central China, accounting for about 61%. North China and South China have yet to become new revenue pillars.