2q13 (oct’12 – dec’12) results...2013/02/07 · 2q13 (oct’12 – dec’12) results...
TRANSCRIPT
2Q13 (Oct’12 – Dec’12) Results Presentation
DUKANG DISTILLERS HOLDINGS LIMITED
INDUSTRY OVERVIEW
CORPORATE PROFILE
FINANCIAL HIGHLIGHTS
GROWTH STRATEGIES
INVESTMENT MERITS
Industry overview
A
Industry overview
4
• China’s baijiu market is a mature market with a huge demand
• Baijiu industry grew at a CAGR of 30% in 2007-2011
• Baijiu industry maintained a high growth rate despite global headwinds amidst the 2009 financial crisis
RMB’ Billion Jan-Nov 2007 Jan-Nov 2008 Jan-Nov 2009 Jan-Nov 2010 2011
Sales 108.7 142.4 185.8 242.2 374.7
Net Profit 13.6 18.7 23.5 31.9 57.2
Source: China Alcohol Drinks Industry Association( Chinese Baijiu industry research report 2010 ) China Daily, http://sp.chinadaily.com.cn/wine/20120724/43917.html#
• Henan, the most populated province in China, is the largest baijiu consumption province
• Baijiu market in Henan is currently valued at more than RMB35 billion
Flavor of baijiu
5
• Three fragrance type : Thick Fragrance, Sauce Fragrance, and Light Fragrance
• Thick Fragrance baijiu dominates 75% of China’s baijiu market, followed by Light
Fragrance baijiu and Sauce Fragrance baijiu, which accounts for 10% and 7% of market
share, respectively
75%
10%
7% 8%
Thick Fragrance baijiu dominates the PRC baijiu market
Thick Fragrance
Sauce Fragrance
Light Fragrance
Others
Peer comparison: P/E vs. CAGR
Sources: Bloomberg, 23 August 2012 6
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
0.0 10.0 20.0 30.0 40.0 50.0
Luzhou Laojiao
P/E (x)
3-yr Sales CAGR (%)
Wu Liang Ye
Moutai Gujinggong
Shanxi Fen Wine Jiugujiu
Tuopai
Swellfun
Yanghe
Laobaigan Dukang Golden Seed
Yilite
Corporate profile
B
Brand origin of Dukang
8
Famous baijiu with a history dating back > 2,000 years
Named after Du Kang (杜康) who lived in the Xia Dynasty (21st – 16th century B.C.)
• Forefather of baijiu in China
Frequently cited by numerous famous poets & personalities
• Cao Cao (曹操) (a central figure in the Three Kingdom Period) said in his poem《短歌行》
“对酒当歌,人生几何, 譬如朝露,去日苦多。
慨当以慷,忧思难忘,何以解忧,唯有杜康。”
Premier Zhou Enlai called for the revival of Dukang baijiu
“复兴杜康,为国争光”
• Yichuan Dukang Group was set up in 1968
• Ruyang Dukang Group Co was established on the original site of Du Kang’s brewery in 1972
Corporate milestones
9
2005
2008
2010
2011
February
Acquired Henan Siwu Spirit
September
Listed on SGX Mainboard as the first and remains to be the only non A-share listed PRC baijiu manufacturer
May
Completed acquisition of Luoyang Dukang Holdings
March
Listed TDR on the TWSE and raised proceeds of RMB237 million for expansion
April
Launched iconic premium product series “Jiuzu Dukang” (酒祖杜康)
Yu Shang Jiu
Siwu Old Cellar 1949
New Laojiao Zhencang
Jin Yu Zun
Zone 12 Cellar Jiuzu Dukang Series
Classic Huagui Guohua Dukang Series
5 Star Zhonghua Dukang Series
Lao Dukang Lao Dukang Series
Wide range of products
Well-established baijiu brand since 1949
Targets mid-to-mass market
Nationally famous baijiu brand
Targets mid-to-high end market
10
Established brand awareness
11
China Well-Known Trademark (2005)
China Intangible Cultural Heritage (2008)
Dukang’s brand synonymous with market leadership in product quality and brand identity
National awards won include:
China Time-honored Brand (2005)
Top 10 Chinese Wine Brands (2001)
Star Enterprise Of The National Wine Industry (1994)
Henan Well-Known Trademark (2008)
Financial highlights
C
13
2Q13 sales up 36.7% yoy
Note: Financial Year End - 30 June
441.7 445.4 455.1
535.6
225.8 255.5 170.2 167.6
261.2 216.8 199.1 169.1
76.7 51.0 56.9 33.8
63.2
455.9
635.8
285.3
483.6
182.8 310.2
54.3
315.6
486.1
194.7
354.7
130.1
226.7
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
FY09 FY10 FY11 FY12 1H12 1H13 2Q12 2Q13
RM
B (
mil)
Turnover
Siwu Regular Siwu Premium Luoyang Dukang Regular Luoyang Dukang Premium
702.9 779.6
1,425.7
1,826.6
782.5
1,144.8
2Q13: Oct – Dec 2012
738.3
540.0
14
Enlarged sales contribution from 「Dukang」 brand
Note: Financial Year End - 30 June
22.1%
32.0% 14.0%
31.9%
FY2011
30.7%
42.0%
4.6%
22.7%
2Q2013
24.1%
33.9% 10.5%
31.5%
2Q2012
Luoyang Dukang Premium Luoyang Dukang Regular Siwu Premium Siwu Regular
26.6%
34.8% 9.3%
29.3%
FY2012
2Q13: Oct – Dec 2012
100.5 133.6 123.9
83.7 81.7 137.6 136.1
90.0 93.0 155.6 154.5
51.8 55.6
170.2 144.2 165.6 87.9
167.6
71.3
98.2 57.0
34.8 42.4
72.8 65.5
36.1 41.5
76.5 65.4
15.7 19.8
56.9 58.6 33.8
17.2
33.8 63.2 44.6
124.0 177.8
109.3 102.4
182.8 215.2
135.4
173.4
310.2
54.3 31.4
86.5
117.4
80.4 64.6
130.1 172.7
118.7
128
226.7
0
100
200
300
400
500
600
700
800
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
RM
B (
mil)
Seasonality Of Quarterly Sales
Siwu Regular Siwu Premium Luoyang Dukang Regular Luoyang Dukang Premium
15
2Q13 sales boom in traditionally lull quarter
Note: Financial Year End - 30 June
406.5
242.5
453.4
590.7
540.0
257.6
515.1
442.5
210.5 243.6
201.6 210.4
124.1 118.5
180.9
231.8
171.8
2Q13: Oct – Dec 2012
738.3
Sales volume & average selling price
16
290 208 553 643 633 422 730 907 593 679 1,136
187.2
151.0 156.4 182.6
126.8 153.1
178.2 190.4 200.2 188.5 199.6
0
50
100
150
200
250
300
0
200
400
600
800
1,000
1,200
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Luoyang Dukang Premium
Total Sales Volume (tonnes) ASP (RMB/kg)
2,272 1,332 3,378 4,768 3,575 3,004 5,380 6,265 3,960 5,027 8,615
27.8
33.5 36.7 37.3
30.6 34.1 34.0 34.3 34.2 34.5 36.0
0
10
20
30
40
-
2,000
4,000
6,000
8,000
10,000
4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Luoyang Dukang Regular
Total Sales Volume (tonnes) ASP (RMB/kg)
(Tonnes) (RMB/Kg)
(Tonnes) (RMB/Kg)
Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
438 635 373 249 266 458 421 230 276 530 431 108 148 467 495 210 137 268
162.8 154.6 152.7 139.6
159.4 159.0 155.6 156.8 150.4 144.3 151.7 145.4 133.8 121.8 118.4
160.9
125.5 126.1
0.0
50.0
100.0
150.0
200.0
0
200
400
600
800
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Siwu Premium
Sales Volume (tonnes) ASP (RMB/kg)
4,349 5,543 4,957 3,371 3,713 6,197 5,943 3,856 4,285 7,169 6,491 2,258 2,357 7,129 6,218 6,635 4,343 7,852
23.1 24.1 25.0 24.8 22.0 22.2 22.9 23.4 21.7 21.7
23.8 23.1 23.6 23.9 23.2 25.0
20.2 21.3
0.0
10.0
20.0
30.0
40.0
0
2,000
4,000
6,000
8,000
10,000
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Siwu Regular
Sales Volume (tonnes) ASP (RMB/kg)
(Tonnes) (RMB/Kg)
(Tonnes) (RMB/Kg)
Sales volume & average selling price
17 Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
22.0 28.7 27.3 16.0 12.7 29.3 29.3 20.7 19.3 32.5 40.9
13.7 15.8 44.6 35.6 34.8 20.6
40.9 34.3
50.4 29.7
17.6 22.0
38.0 34.5 19.5 20.8
37.8 36.4
8.9 10.8
31.5 31.3
16.0 9.1
20.2 18.0 12.7
38.9 59.6
34.6 32.4
59.3 67.6
42.7 60.5
105.2
27.4 14.6
42.3
58.1
41.4 34.0
69.0 95.1
63.8 70.9
125.7
0
50
100
150
200
250
300
350
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
RM
B (
mil)
Quarterly Gross Profit
Siwu Regular Siwu Premium Luoyang Dukang Regular Luoyang Dukang Premium
57.0
18
2Q13 gross profit up 42.9% yoy
Note: Financial Year End - 30 June
56.3
79.1
33.6 34.7
67.3 63.8
85.5
67.4
151.5
195.1
98.6 93.0
204.4
229.6
157.3 161.1
2Q13: Oct – Dec 2012
292.0
19
21.9% 21.5% 22.0% 19.1%
15.6%
21.3% 21.5% 23.0% 20.8% 20.9%
26.5% 26.5% 28.4%
26.2% 24.7%
21.0% 23.4% 24.4%
48.1% 51.3% 52.2%
50.7% 51.9% 52.2% 52.7% 54.0%
50.0% 49.4%
55.7% 56.5% 54.5% 55.4%
53.4%
47.3%
53.0%
59.8%
28.5% 28.5% 31.4%
33.5% 31.7% 31.6% 32.5% 31.4% 31.6%
34.9% 33.9%
50.4%
46.4% 48.9% 49.5%
51.5% 52.7% 53.0%
55.1%
53.7%
55.4%
55.4%
0%
10%
20%
30%
40%
50%
60%
70%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Gross Profit Margins
Siwu Regular Siwu Premium Luoyang Dukang Regular Luoyang Dukang Premium
Upward trend in margins for 「Dukang」 brand
Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
9.6 20.2 11.4 10.8 8.9 14.3 13.5 19.4 18.1 36.3 45.9 29.5 19.4 35.6 97.4 71.9 39.4 50.6
5.6% 8.7%
6.3% 9.2%
7.2% 7.2% 6.7% 8.0% 8.6% 8.2% 8.9% 11.5%
8.0% 6.6%
16.5% 15.9%
9.7% 6.9%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
20
40
60
80
100
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
A&P expenses and A&P as a percentage of sales
A&P A&P as a % of sales
20
(RMB ‘Mil) %
Investments to enhance brand value
Note: Financial Year End - 30 June
China National Sugar and Alcoholic Commodities Fair
Peony Cultural Festival
TV Ads
Luoyang Dukang National Trade Fair
2Q13: Oct – Dec 2012
104.9
25.1
168.0
218.1
131.1
207.9
94.4
144.0
149.7 14.9%
3.2%
11.8% 11.9%
16.8% 18.2% 17.5% 19.5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
20
40
60
80
100
120
140
160
180
200
FY09 FY10 FY11 FY12 1H12 1H13 2Q12 2Q13
Pe
rce
nta
ge (
%)
RM
B (
mil)
Net Profit & Margin
Profit attributable to equity holders Net Profit Margin
21
*
1H13 earnings represents 95.3% of FY12 earnings
*One-off non-cash valuation loss of RMB149.7 million related to the fair value loss recognized upon the conversion of convertible bonds in November 2010. The fair value loss represents the difference between the initial recognition of the fair value of all components of the convertible bonds of RMB349.7 million as at 10 May 2010 (issue date) and the principal amount of the convertible bonds of RMB 200.0 million. Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
Half Year Analysis
Quarterly Analysis
22
27.7 34.9 27.7 14.6 15.9 35.6 33.2
-59.6*
13.4 60.8 75.2 18.6 36.6 94.4 62.4 24.7 63.9 144
16.1% 15.0% 15.3% 12.4% 12.8%
16.9% 16.5%
-24.5%
6.4%
13.7% 14.6%
7.2%
15.1% 17.5%
10.6%
5.4%
15.7% 19.5%
-30%
-20%
-10%
0%
10%
20%
30%
40%
-100
-50
0
50
100
150
200
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
(%)
RM
B (
mil)
Quarterly Net Profit & Margin
Net Profit Net Profit Margin
2Q13 earnings up 52.5% yoy on margin improvement
Note: Financial Year End - 30 June
*One-off non-cash valuation loss of RMB149.7 million related to the fair value loss recognized upon the conversion
of convertible bonds in November 2010
2Q13: Oct – Dec 2012
RMB (mil) As at 31 Dec 2012 As at 30 Jun 2012
Total Equity 1,773.1 1,565.2
Total Assets 2,229.7 1,976.7
Inventories 385.6 404.9
Cash & Equivalents 731.3 469.2
Total Liabilities 456.6 411.5
Bank Borrowings 60.0 55.0
Gearing Net cash Net cash
23
Healthy financial position
Note: Financial Year End - 30 June
RMB (mil) 2Q13 2Q12
Net cash generated/(used in) operating activities 221.6 314.9
Net cash generated/(used in) investing activities (0.9) (0.2)
Net cash generated/(used in) financing activities (16.0) (2.2)
Net Increase/(decrease) in cash and cash equivalents
204.7 312.5
2Q13: Oct – Dec 2012
24
No. of days 1Q13 FY12
Accounts Receivable Turnover 10 15
Accounts Payable Turnover 47 72
Inventory Turnover 108 176
Turnover ratios
Notes: Accounts Receivable Turnover = Trade receivables as at end of quarter x 365 days 4 x Revenue for the quarter Accounts Payable Turnover = Trade and bills payables as at end of quarter x 365 days 4 x Cost of sales excl. consumption tax for the quarter Inventory Turnover = Inventories as at end of quarter x 365 days 4 x Cost of sales excl. consumption tax for the quarter
Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
Growth strategies
D
Our vision
26 Geographical Reach
Scal
e o
f O
pe
rati
on
s
Top-tier brand in Henan Province by 2013 Top-tier brand in the PRC by 2015
Henan Province (Luoyang and Zhengzhou)
Neighbouring Provinces
National
Three-pronged growth strategies
27
2. Strengthen distribution
network
3. Improve capacity and utilisation
1. Enhance brand value
1. Enhance brand value
Premium positioning of Jiuzu Dukang "千年老窖万年糟,酒好全凭窖池老” – grain alcohol from older fermentation pools make better
quality baijiu
Rather then separate each product range by the age of grain alcohol, Jiuzu Dukang retails under four categories distinctly characterized by age of fermentation pools, aged between 20 to 50 yrs
Made a 19.7% contribution to Group sales in 2QFY13
Differentiated positioning of Dukang and Siwu brands to target mid to high class and mass-market consumers respectively High-quality but economically-priced Siwu brand products appeal highly in times of economic
uncertainty
Widen product range under Dukang brand Leverage on listing in Taiwan by cooperating with Taiwan Tobacco and Liquor Corporation in Dec
2011 to OEM sake
Penetration into overseas liquor markets Partnership with one of Korea’s largest F&B business group - Lotte Chilsung Beverage Co., Ltd in
December 2011 to enter the South Korean market
The accreditation of Sino-Japanese Friendship Partnership Award kicks off its journey to Japan
28
2. Strengthen distribution network
No. of distributors *
Siwu Luoyang Dukang
2010 2011 Dec 2012 2010 2011 Dec 2012
Henan Province 369 64 69 80 114 144
The rest of China 8 5 0 22 56 83
*None of the top 5 distributors accounts for more than 10% of sales
Super Market Restaurant Specialty Store Flagship Store Dennis Department Stores
Present at “China National Sugar and Alcoholic Commodities Fair”
Host the annual “Dukang National Trade Fair” on 18 May
Streamline distribution network of Siwu and expand distribution network of Luoyang Dukang
29
3. Improve capacity & utilisation
700
2,200 2,410
2,300
700
2,200 2,410
2,300
700
2,200
347
1,025 1,175 1,262
355
2,196
2,446 2,403
802
2,313
50% 47% 49% 55%
51%
100% 101% 104%
115%
105%
0%
20%
40%
60%
80%
100%
120%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Grain Alcohol of Luoyang Dukang*
Quarterly Capacity Output Utilisation Rate
(Tonnes) %
30
*Annual capacity of 7,610 tonnes from 2,968 of fermentation pools ** Fermentation period of 60 days for Luoyang Dukang Note: Financial Year End - 30 June 2Q13: Oct – Dec 2012
3. Improve capacity & utilisation
309
929 929
723
309
929
788 636
-
636
478
919 844
651
357
1,082
749 642
-
638
155%
99% 91%
90%
116%
116%
95%
101%
100%
0%
20%
40%
60%
80%
100%
120%
140%
160%
(100)
100
300
500
700
900
1,100
1,300
1,500
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Grain Alcohol of Siwu*
Quarterly Capacity Output Utilisation Rate
(Tonnes) %
*Annual Capacity of 1,909 tonnes from 1,548 of fermentation pools ** Fermentation period has been adjusted from 45 days to 60 days since Jan 2012 Note: Financial Year End - 30 June
31
Zero output as pool idle time changed
from Jun - Aug to
Jul - Sep
2Q13: Oct – Dec 2012
Investment merits
E
Investment Merits
Strong growth momentum for the Chinese baijiu industry; supported by
population growth and rising disposable income
Baijiu industry appears largely resilient to economic cycles as consumers
tend to drink baijiu in both good and bad times
「Dukang」 brand enjoys strong brand recognition in China
Growth potential from the launch of new premium products and
increasing utilization rates
Attractive valuation in comparison with Chinese peers
33
Thank You “何以解憂,唯有杜康。”
Contact details: Ngo Yit Sung Corporate & IR Manager, Dukang Distillers Holdings Ltd Tel: +65 8111 4885 (Singapore) + 886 989 260 687 (Taiwan) Email: [email protected] Kamal Samuel / Kathy Zhang IR Consultant, Financial PR Pte Ltd Tel: +65 6438 2990 (Singapore) Email: [email protected]
34