In November last year, Shunxin Agriculture finally got rid of its real estate business.

However, without the "drag" of this sector, Shunxin Agriculture did not experience a rapid recovery in performance. In the first half of the year, Shunxin Agriculture's revenue and net profit were 5.687 billion yuan and 422.6 million yuan, with growth rates of -8.45% and 621.87%, respectively, showing "profit growth without revenue growth." In the second quarter, Shunxin Agriculture achieved revenue and net profit of 1.63 billion yuan and -28 million yuan, with growth rates of -23.26% and 93.15%, respectively.

In comparison, whether in the second quarter or the first half of the year, Shunxin Agriculture's net profit showed significant growth. However, this was mainly due to the low base from the previous year. In the first half of last year, Shunxin Agriculture's net profit was -80.97 million yuan. Over a longer period, the net profit in the first half of this year only returned to the level of 2021.

Compared to net profit, people are clearly more concerned about Shunxin Agriculture's revenue situation, as this is already the fourth consecutive year of revenue decline for Shunxin Agriculture. Compared to the peak revenue of 9.52 billion yuan in the first half of 2020, Shunxin Agriculture's revenue in the first half of this year has dropped by more than 40%.

Is "Erguotou" Harder to Sell Now?

In November last year, Shunxin Agriculture finally divested its real estate business, shifting its main operations from liquor, pork, and real estate to liquor and pork.

In external expectations, after divesting the real estate business, Shunxin Agriculture could focus more on its core operations, and its performance would naturally improve. However, reality often differs greatly from expectations—despite no longer being dragged down by the real estate business, Shunxin Agriculture has not moved in a positive direction and even shows signs of worsening.

Breaking it down by business, among Shunxin Agriculture's two main operations in the first half of the year, the pork business is actually improving. In the first half of the year, the revenue from this business was 785.7 million yuan, with a main profit of 19.91 million yuan and a gross margin of 2.53%. In the first half of last year, the revenue from this business was 1.24 billion yuan, with a main profit of -154 million yuan and a gross margin of -12.42%. In comparison, although the revenue from the pork business declined significantly in the first half of the year, with the rebound in pork prices, the business successfully emerged from losses.

However, this is only in comparison to its own performance. Horizontally, in the first half of the year, the gross margin of WH Group's slaughter business was 5.17%, while Shunxin Agriculture's gross margin was only half of that.

Of course, the pork business is not the core of Shunxin Agriculture. The most important business for Shunxin Agriculture is still liquor—in the first half of this year, Shunxin Agriculture's liquor business achieved revenue of 4.698 billion yuan, accounting for 82.61% of total revenue. However, Shunxin Agriculture's liquor business is not doing well. In the first half of the year, the gross margin of this business was 42.86%, down 3.56 percentage points from 46.42% in the same period last year and down 7.36 percentage points from the 50.22% gross margin at the end of 2023.

Of course, compared to other liquor companies, Shunxin Agriculture does not face inventory pressure. In the first half of the year, Shunxin Agriculture's inventory was 1.456 billion yuan, less than one-third of the 5.039 billion yuan in the same period last year, which is a positive aspect for Shunxin Agriculture. However, looking at contract liabilities, which reflect dealers' willingness to purchase, in the first half of the year, Shunxin Agriculture's contract liabilities were 579.2 million yuan, significantly lower than the 1.942 billion yuan in the same period last year, indicating a decline in dealers' purchasing enthusiasm.

Previously, Kanjian Finance analyzed several liquor companies and found that as competition in the liquor industry intensifies, each company faces significant sales pressure.

As a giant in the budget liquor market, although Shunxin Agriculture does not face rising inventory pressure and there is no price inversion due to low prices, as other liquor companies increasingly target the lower-end market, Shunxin Agriculture's flagship product, Niulanshan Erguotou, is also facing increasing difficulties in sales.

Neither "Two Cards" Is Easy to Play

When liquor companies face growth difficulties, they often have two ways out: national expansion and premiumization.

After Niulanshan Erguotou encountered growth bottlenecks, Shunxin Agriculture tried both paths but unfortunately failed to succeed.

First, let's look at national expansion. By region, Shunxin Agriculture's revenue is divided into non-Beijing regions and Beijing regions. In the first half of this year, Shunxin Agriculture's revenue from non-Beijing regions was 4.085 billion yuan, while revenue from Beijing regions was 1.601 billion yuan, accounting for 71.84% and 28.16%, respectively.

In the same period last year, revenue from non-Beijing regions and Beijing regions was 4.134 billion yuan and 2.078 billion yuan, accounting for 66.55% and 33.45%, respectively.

In comparison, in the first half of this year, the proportion of revenue from non-Beijing regions increased by 5%. However, upon closer inspection, the main reason is the significant decline in revenue from Beijing regions, not growth in revenue. Generally, national expansion refers to driving revenue growth by entering new markets, which Shunxin Agriculture has not achieved.

Next, let's look at premiumization. As mentioned earlier—in the first half of this year, Shunxin Agriculture's liquor business achieved revenue of 4.698 billion yuan, with a gross margin of 42.86%. For a liquor company, such a gross margin is clearly not high. If premiumization could be achieved to increase prices, Shunxin Agriculture's revenue would naturally rise.

In recent years, Shunxin Agriculture has also been striving to move toward premiumization. According to media reports, as early as 2021, Shunxin Agriculture launched the premium brand "Kuishenghao," priced at 1,598 yuan per bottle. However, judging from the official Taobao store, monthly sales of this product are mostly in the single digits or tens, indicating low consumer acceptance. Additionally, another flagship product, Jinbiao Chenniang, is also struggling. In the first half of the year, sales were 2,220.22 kiloliters, down 46.38% year-on-year, while production was 2,075.99 kiloliters, down 52.19% year-on-year.

According to the financial report, in the first half of the year, Shunxin Agriculture's low-end, mid-range, and high-end liquor products achieved revenues of 3.456 billion yuan, 638 million yuan, and 603 million yuan, respectively, with year-on-year growth of 4.87%, -7.29%, and 5.94%. Although revenue from high-end liquor grew, this was mainly due to a low base, and the actual growth was minimal.

In reality, it is quite difficult for Shunxin Agriculture to successfully achieve premiumization. After all, Niulanshan has long followed a low-price, mass-market strategy, with most products priced below 50 yuan. Generally, it is easier for premium brands to move downmarket, but it is very difficult for low-end brands to move upmarket. Additionally, in the first half of the year, Shunxin Agriculture's sales expenses were 456.6 million yuan, while total operating costs were 5.048 billion yuan, with sales expenses accounting for less than 10% of total operating costs. Compared to brands like Jiugui Liquor, Shunxin Agriculture's sales expenses are relatively low.

Overall, as the "King of Budget Liquor," Shunxin Agriculture is currently facing multiple challenges, none of which are easy to resolve in the short term. Therefore, although its stock price has shown a "V-shaped rebound" in the past two months, it still has a long way to go before a true reversal.