Author | Liu Chaoran
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Investment in consumer goods in the food and beverage category has been extremely hot this year.
According to statistics, although 2020 is affected by the epidemic and regional isolation has caused a series of impacts on investment and financing, the amount of financing for catering and consumer goods in 2020 has also reached 7.9 billion yuan. With the gradual improvement of the epidemic situation in 2021, the total amount of financing in the first three months of this year exceeded 7.9 billion yuan in the whole of last year, and in May, the amount of financing exceeded 10 billion yuan, which was 2% of the amount of financing for consumer goods in the same period last year. Times more.
Among them, several large financings with extremely high exposure rates include: Michelle Ice City’s financing of 2 billion yuan, Naixue’s tea C round of financing of 100 million US dollars, Jane Eyre Yogurt’s B round of financing of 800 million yuan, and the new round of Yuanqi Forest financing. 500 million dollars and so on.
Recently, another well-known casual snack consumer product has attracted market attention. Weilong, with a history of more than 20 years, issued a round of financing with an amount of about 3.56 billion yuan. The lineup of investors in this round of financing is very luxurious. The lead investors are CITIC Industrial Fund and Hillhouse Capital. Many well-known institutions such as Yunfeng Fund, Sequoia China and Tencent have followed suit.
Subdivide the strongest operating capability in the leisure snack industry
Weilong chose a more traditional dealer model in its sales channels.
As of the end of 2020, the number of dealers cooperating with the company was 1950, contributing more than 90% of the company’s operating income, while online sales accounted for less than 10%. Among the peers, Yanjin shop and Qiaqia Food mainly adopt the dealer model; the three squirrels are mainly sold online, accounting for more than 70%; the good product shop has a balanced development, with 50% online and offline.
Inventories and accounts receivable will be affected by different sales channels and are also important indicators to measure the consumption sector. According to Weilong’s prospectus, Weilong spicy strips are sold to downstream distributors in the form of first payment and later goods, and to Internet e-commerce platforms, the industry’s average billing period is about 90 days. Yanjin shop accounts for a relatively high percentage of sales from supermarkets and supermarkets. The number of accounts receivable turnover days is the highest in the industry, 29 days in 2020, and the accounts receivable turnover days of Qiaqia and Liangpin shops are 14-15 days. about. The three squirrels are mainly sold online, and their accounts receivable turnover days are 8.94 days. Weilong’s accounts receivable turnover days are the smallest in the industry. In 2020, it is only 2.5 days, which means that after the product is sold; the payment can be returned in two and a half days, which is a strong position for the downstream. In terms of inventory turnover days, Weilong’s 67 days is second only to Liangpin’s 52 days. Weilong’s ability to clear inventories is also excellent. With fewer inventories, the company’s asset turnover and operating efficiency will naturally increase. In this way, Weilong has the shortest and most efficient operating cycle from procurement to sales to payment collection. Can Weilong’s business support a market value of 60 billion yuan? Where did the pre-IPO valuation of 60 billion come from? Calculated based on Weilong’s only external equity financing, the financing situation of the Pre-IPO in this March A round of this year. Well-known institutions such as CITIC Industry Fund, Hillhouse, Tencent, Yunfeng Fund, Sequoia China and other well-known institutions have invested a total of US$549 million and purchased the newly issued shares of Weilong. The total shareholding ratio is about 5.85%. Assuming that 549 million U.S. dollars, based on the current 6.39 yuan to U.S. dollar exchange rate, 549 million U.S. dollars equals 3.50811 billion yuan, accounting for 5.85%. Therefore, the company’s pre-IPO valuation is 59.968 billion yuan, which is approximately It is equal to 60 billion yuan. It is guessed that this financing from the Pre-IPO round will pay sponsorship and audit fees on the one hand, and on the other hand the company may need to replenish liquidity, which will require a certain amount of money in the near future; perhaps it is worried that the valuation will fluctuate after the IPO. The price transfer of part of the equity and the upcoming listing are the advantages, allowing Hillhouse, Tencent, and Yunfeng Fund to give a valuation of 60 billion, in order to use the “anchor effect” to allow the market to reach a consensus. What will Weilong rely on to support its valuation of 60 billion yuan? Select listed companies in the A-share leisure snack industry for comparison: It is not difficult to find that Weilong’s sales revenue is only higher than that of Yanjin Shop, and its operating revenue is less than 50% of the three squirrels. Because the company’s cost control is better, the sales expenses are the lowest, only 371 million, so the company’s gross profit and net profit margins Compared with the same industry, the net profit margin is as high as 19.9%. It can be seen that the company’s profitability is relatively good. Weilong’s business is indeed a very good business. Weilong’s most eye-catching factor is the return on equity (ROE), which is as high as 66.94%; The reason is that Weilong’s advantage is the relatively high degree of product concentration. The company’s product line is divided into three categories: the first category is seasoned noodle products, spicy noodles, including gluten, spicy sticks and chez-yaki, etc.; the second category is vegetable products. , Including instant snacks such as konjac cool and wind eat kelp; the third category is soy products and others. According to the prospectus, in 2020, the income of spicy strips will account for 65.3% of Weilong’s total income, and the income of vegetable products will account for 28.3%, and the product concentration is relatively high. This means that the company can control the cost of upstream raw materials for food. Judging from the hot strip process in the prospectus, its raw materials are mainly flour and soybean oil. These two products are bulk commodities and are affected by macro-control. There are no substitutes. Based on price fluctuations in recent years, they are basically stable. At the same time, according to the company’s cost situation: 2018-2020 raw material costs accounted for 31.3%, 29.8% and 27.8% of revenue, respectively. It can be inferred that the company’s raw material procurement costs are relatively stable and continuously optimized. In contrast, Liangpin Shop, Three Squirrels, and Yanjin Shop are less optimistic about cost control. The reason is that some of the products of these companies’ product lines are preserved meat, and pork is the main product, accounting for different proportions. They are 25.5%, 13.3%, and 27.7%. Pork has a pig cycle, and its price has fluctuated greatly in recent years. Therefore, cost control is more difficult. Roasted nuts are also the main products of these companies and the raw materials for nuts. Originating from planting or importing, there are more uncertain factors and longer cycles, which makes cost control more difficult, which will affect profitability to a certain extent. In contrast, Weilong’s products have a high degree of concentration. Standardization can be achieved from procurement, production, storage, and sales, and the cost is controllable, which is indeed superior. From the perspective of Weilong’s annual compound growth rate of 22% in revenue and 31% in profit, the company is in the growth stage. From the perspective of the competitive structure of the subdivided “seasoned noodle market”, the current market is relatively fragmented. Although Weilong’s market share is ranked first in 2020, it only accounts for 5.7%. Assuming that the market size of 60 billion seasoned pasta products in 2018 and the CAGR of 10% of the industry are calculated, it is optimistic that the market size will reach 80 billion in 2021. At the same time, based on Weilong’s 7% industry market share, Weilong’s business this year The revenue is expected to be around 5.6 billion, a year-on-year increase of 35.9%, which can still support the current valuation in the short term. However, the growth space of Weilong’s future industry will be constantly compressed by new entrants. And it is important that this market is difficult to unify, because the barriers to entry are low, and other manufacturers are also targeting Weilong’s track. Therefore, it is difficult for Weilong to build a long-term and effective moat, and the growth ceiling in the future is also quite limited. Relying on a single product may become Weilong’s “Achilles’ heel”. Even a world-class consumer leader like Coca-Cola can only be used as an anti-inflation asset allocation tool in the secondary market. The current valuation is relatively high and the performance ranks fourth, but the valuation of 60 billion is the sum of the market value of the top three. It is believed that investment institutions have given higher expectations for the future, so wait and see and pay attention to how Weilong will cash in on its performance after going public
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