Introduction
The Xu Guifen family, who controls Huangshanghuang (002695.SZ), known as the “Queen of Marinated Food,” is once again embroiled in controversy. On September 22, Huangshanghuang disclosed details of a private placement, with the Xu Guifen family fully subscribing to the 450 million yuan issuance initiated nine months ago.
Controversy Surrounding the Private Placement
This private placement has sparked doubts for several reasons. First, Huangshanghuang’s stock price is currently at a historical low, and the private placement price of 10.08 yuan per share is a 10.56% discount to the current price. This move has raised suspicions of arbitrage by the actual controllers. Secondly, the funds raised will be entirely used for production expansion and warehouse construction. However, the company’s capacity utilization rate has significantly declined in recent years, with several projects not reaching expected capacity or being terminated. Is there a necessity for further expansion?
Xu Guifen, called the “Queen of Marinated Food,” started her entrepreneurial journey at 42 after being laid off, turning her marinated food business into a billion-yuan enterprise and creating a family fortune of hundreds of millions. But now, the marinated food business is no longer easy. Huangshanghuang’s performance has drastically declined, with net profits in 2022 dropping to 30.8162 million yuan, a historical low. After a brief wave of store closures, the Xu Guifen family restarted expansion efforts in 2023, opening 600 new stores in the first half of the year, yet revenue decreased instead of increasing.
From Laid-Off Worker to Queen of Marinated Food
Xu Guifen’s life has seen many ups and downs. Born in October 1951 into a dual-worker family, she found her first stable job in 1976 at a vegetable market due to her father’s unit. Her diligence led to a transfer to Nanchang Meat Food Company in 1979, marking her first significant engagement with the food industry. In 1984, she was appointed as a store manager.
However, she faced the wave of layoffs in 1993 and was forced to leave the food company. Faced with limited options, Xu Guifen turned to entrepreneurship, focusing on the marinated food business. She borrowed 12,000 yuan and opened the first Huangshanghuang Roast Poultry Shop in Nanchang, laying the foundation for her marinated food empire.
By 1995, Huangshanghuang began franchising. In just three years, it expanded to over 130 stores, generating 13.57 million yuan in sales and becoming a sensation in Jiangxi. Under Xu Guifen’s leadership, Huangshanghuang went public in 2012, achieving 893 million yuan in revenue and 97.4072 million yuan in net profit that year.
As Huangshanghuang’s performance stabilized and revenue grew, Xu Guifen handed over the reins to her eldest son, Zhu Jun, in 2017, who took on the roles of chairman and general manager. Her second son, Zhu Jian, became vice chairman and vice general manager, with Xu Guifen and her husband Zhu Jiangen both serving as directors.
By 2019, Huangshanghuang’s revenue had doubled since its IPO, reaching 2.117 billion yuan, with net profits of 220 million yuan. Under the Xu Guifen family’s management, Huangshanghuang, along with Juewei Duck Neck and Zhou Hei Ya, became one of the top three marinated duck brands, cementing Xu Guifen’s status as the “Queen of Marinated Food.”
According to Wind data, Huangshanghuang’s performance peaked in 2020, with revenue and net profits reaching 2.436 billion yuan and 282 million yuan, respectively. That year, the Xu Guifen family ranked 523rd on the Hurun Rich List with a wealth of 11 billion yuan. In 2021, Xu Guifen and her family were listed at 2,378th on the Forbes Billionaires List with a wealth of 1.2 billion US dollars.
The Challenge of Digesting 450 Million Yuan Capacity Expansion
On September 22, Huangshanghuang announced the completion of the private placement, raising concerns due to the low subscription price. The price of 10.08 yuan per share was a 10.56% discount to the stock price of 11.27 yuan per share on the issuance day. Notably, Huangshanghuang’s stock price is at a historical low, with the private placement price even lower than the year’s lowest price of 10.35 yuan per share.
Additionally, all the shares were subscribed by Xinyu Huangshanghuang, controlled by the Xu Guifen family. The shareholding structure reveals that the Xu family owns significant stakes in Huangshanghuang Group, which in turn holds a 99% stake in Xinyu Huangshanghuang.
The funds raised will be used for three projects: the meat duck slaughtering and by-product processing project by Fengcheng Huangda Food Co., Ltd., the 8,000-ton marinated food processing project by Zhejiang Huangshanghuang Food Co., Ltd., and the food processing and cold chain storage center construction project by Hainan Huangshanghuang Food Co., Ltd.
However, in recent years, Huangshanghuang’s performance has been declining. In 2021, the company’s revenue and net profit decreased to 2.339 billion yuan and 145 million yuan, down 4.01% and 48.76%, respectively. The decline continued in 2022, with revenue and net profit dropping to 1.954 billion yuan and 30.8162 million yuan, down 16.46% and 78.69%.
With declining performance, Huangshanghuang’s capacity utilization rate also fell from 63.58% in 2020 to 46.76% in 2022. Despite maintaining a capacity of 63,000 tons, the completion of the new projects will increase capacity by 12,000 tons, reaching a total of 75,000 tons. With the current low utilization rate, how to digest the increased capacity will be a challenge for Huangshanghuang.
In the first half of 2023, some projects failed to meet expected capacity or were terminated due to insufficient demand. According to the 2023 semi-annual report, the “5,500-ton meat product processing project” and “6,000-ton meat product processing project in Shaanxi” did not reach expected capacity, while the “8,000-ton meat product and other cooked product processing project” was terminated.
Moreover, declining performance led to a wave of store closures. At the end of 2021, the company had 4,281 stores, but this number decreased to 3,925 by the end of 2022, a reduction of 356 stores.
In 2023, Huangshanghuang resumed its store expansion strategy. By the end of June 2023, the company had 4,213 stores, including 255 directly operated stores and 3,958 franchise stores, covering 28 provinces and 226 cities nationwide.
However, the actual number of new stores fell short of expectations. Huangshanghuang planned to open 759 new stores in the first half of 2023 but only opened 600. The revenue for the first half of 2023 showed a slight decline, despite the increase in store numbers.
With declining capacity utilization rates and store expansions failing to boost revenue, how to lead Huangshanghuang back to growth is a critical challenge for the second-generation leader Zhu Jun.
Post time: Jul-04-2024