Creative Picture/Beijing News Reporter Wang Yuanzheng
html On December 26, Zhongding United Animal Husbandry Co., Ltd., known as the "largest innovative animal husbandry consortium in China", issued an announcement that it plans to withdraw from New Third Board , which is only more than two years after it was listed.Zhongding Animal Husbandry has always advocated "inventory integration" of small and medium-sized ranches across the country and used it to expand rapidly, but it has slowed down the speed of ranches integration since 2017. According to people familiar with the matter, Zhongding Animal Husbandry is about to change its strategic direction, and the New Third Board is no longer suitable for its new development needs.
Industry analysts believe that the difficulty of operating and integration of small and medium-sized ranches in recent years is the fundamental reason why Zhongding Animal Husbandry has changed its strategic model, and the rapid expansion has also brought it risks such as high debt-to-asset ratio and tight cash flow. In the future, Zhongding Animal Husbandry may turn to the direction of large ranches or internationalization.
exit from the New Third Board due to changes in strategic model
Zhongding United Animal Husbandry Co., Ltd. Shareholders' Meeting on February 26 passed the "Proposal on Applying for the Termination of Listing of Company Stocks in the National Small and Medium Enterprise Stock Transfer System", which means that it has just started the road to the New Third Board, which has just started for more than two years, is about to come to an end.
public information shows that Zhongding Animal Husbandry was established in May 2013 and mainly promotes the "inventory integration" model, that is, integrate the existing small and medium-sized ranch resources in the country through "custody + transformation" method, obtaining its operating rights or control rights, and realizing the light assetization of milk source expansion. Just three years after its establishment, Zhongding Animal Husbandry has integrated more than 140 ranches nationwide, ranking among the top 5 Chinese Animal Husbandry, and claims to be "the largest innovative animal husbandry consortium in China" and "Abstract Hilton".
Zhongding Animal Husbandry is also a startup company that has entered the Mengniu system. Its chairman Zhang Xiaoya, director Wang Aisuo, director Xian Yuxing, financial director Li Ming , sales director Wu Yuwei, and the company's actual controller and general manager Sun Guoqiang have worked in Mengniu.
In July 2015, Zhongding Animal Husbandry completed the shareholding reform, introduced strategic investor Dinghui Investment, and completed the first round of private placement. On December 10, 2015, Zhongding Animal Husbandry officially landed on the New Third Board (Securities abbreviation: Zhongding United, stock code: 834586), and completed the second round of private placement of Industries Capital, CITIC Construction Investment and other institutions.
Regarding the reasons for the termination of listing in two years, Zhongding United explained in an announcement on February 26 that "In order to meet the needs of the company's business development, considering the current problems of low stock liquidity and high financing costs, in order to further improve the company's decision-making efficiency, reduce costs, expand competitive advantages, and promote the company's better development."
htmlOn December 28, an executive of Zhongding Animal Husbandry revealed to the Beijing News reporter that the company's withdrawal from the New Third Board is mainly because it has cooperation with other companies and strategic projects in the next step. Due to changes in strategic models, the New Third Board is no longer suitable for its future development, so it "want to seek a better direction."Dou Ming, editor-in-chief of Holstein Magazine, which focuses on the upstream industries of the dairy industry, believes that the idea of stock integration model is good, but it is very difficult. First, the small and medium-sized ranches before integration are not well managed and there are many problems; second, after integration to a certain scale, a lot of talents and strength need to be gathered, and the technical background will not keep up. "In the future, Zhongding may concentrate on doing some joint venture projects and take the path of large ranches or internationalization."
"hosting" model has hidden concerns in the rapid expansion of the "hosting" model
For the fundamental reason for Zhongding Animal Husbandry's transformation strategy, the industry generally believes that it is related to the operating difficulties of small and medium ranches in recent years, and the entire upstream of the dairy industry is facing severe challenges. The rapid expansion model of "inventory integration" has also laid hidden dangers such as high debt-to-asset ratio, tight cash flow, and large fluctuations in performance for Zhongding Animal Husbandry.
Zhongding clearly stated in its fundraising plan in December last year that due to the impact of imported raw milk powder, domestic milk sources are oversupply, raw milk prices are sluggish, the overall situation of the company's industry is poor, and its profitability is lower than expected.
data shows that Zhongding United's net profit in 2015 was -91.5874 million yuan, a year-on-year decrease of 321.85%; in 2016, a year-on-year increase of 131.98%; in the first half of 2017, a year-on-year decrease of 53.3%. In addition, in the first half of 2016, 2016 and 2017, Zhongding United's earnings per share were RMB 0.02, RMB 0.06 and RMB 0.01, respectively.As the price-to-earnings ratio remains unchanged, the overall valuation is on a downward trend.
Although Zhongding has certain advantages in cost control and profitability, its rapid expansion has also consumed most of its profits. From 2013, 2014 and January to May 2015, Zhongding Trustee Ranch's operating cash flow was negative, which explained that "the positive cash flow generated by the already-operated ranch cannot compensate for the negative cash flow generated by the newly taken over ranch." In addition, its annual net profit roughly shows a large fluctuation in alternating profits and losses. Another problem brought about by the rapid expansion of
is tight cash flow and high debt-to-asset ratio. In several fundraising plans, Zhongding Animal Husbandry clearly stated that its purpose is to expand production and operation and supplement working capital.
In the stock issuance manual released on December 13, 2017, Zhongding United revealed that from 2015 to 2016, the company's operating current liabilities accounted for an average of 81.29% of sales. "The company continues to maintain rapid growth and demand for liquidity is relatively large."
Zhongding United also predicts that operating income in 2017 will increase by 15% year-on-year, and the required working capital gap is about 200 million yuan. Therefore, more than 92.4 million yuan will be used from the 152 million yuan raised this time to supplement working capital, and other fund gaps will be resolved by own funds or bank loans.
In terms of asset-liability ratio, from 2014 to the first half of 2017, Zhongding United's debt-liability ratio was 78.64%, 74.43%, 66.72%, and 68.54%, respectively, all exceeding or approaching the 70% "warning line".
integrates thousands of ranches and may be difficult to achieve the goal of
With the change of Zhongding Animal Husbandry's strategic direction, its thousand ranches and goal may be difficult to achieve.
At the bell ringing ceremony held in January 2016, Sun Guoqiang, the actual controller of Zhongding Animal Husbandry, once said that it will continue to increase the intensity of "inventory integration" through the New Third Board platform. It is expected that by 2020, 1,000 ranches will be integrated, covering 500,000 dairy cows, "promoting the overall transformation and upgrading of the dairy industry and high-quality development."
Zhongding Animal Husbandry told Beijing News reporters that its ranch custody model will continue in the future, but the expansion speed will not be as fast as before. Dou Ming, editor-in-chief of Holstein Magazine, also believes that there are few small and medium-sized ranches at present, and Zhongding United's goal of "integrating 1,000 ranches is impossible to achieve."
According to a reporter from the Beijing News, after experiencing rapid expansion in the past two years, Zhongding Animal Husbandry slowed down its pace of "losing land" in 2017.
financial report data shows that in 2015, Zhongding Animal Husbandry "opened up territory" in Hebei, Henan, Shandong, Northeast and other places, and the number of owned and managed ranches increased from 28 at the beginning of the year to 84 at the end of the year. In 2016, this number increased to 111, with another nine ranch entrusting them with technical service consultation. From
to 2017, Zhongding Animal Husbandry had only three external acquisitions or investments: in March 2017, its wholly-owned subsidiary Sanhe Zhongding Animal Husbandry acquired 100% of the shares of Xingtai Zhongbai Animal Husbandry for a price of 34.7 million yuan; in April, its wholly-owned subsidiary Mudanjiang Dingjiang Investment Management Company invested 180 million yuan to jointly establish Mudanjiang Amor Daily Dairy Co., Ltd. with South Korea Daily Dairy, accounting for 60% of the shares; in May, Zhongding Animal Husbandry invested 120 million yuan to establish a joint venture with Lankao County Urban Investment Company, accounting for 60%.
Zhongding Animal Husbandry confirmed to the Beijing News reporter that except for the two cooperations with Daily Dairy and Lankao Urban Investment, the company had no other investment in the second half of 2017.
With the announcement of the strategy of exiting the New Third Board, Zhongding Animal Husbandry's stock issuance plan originally announced in January this year was also terminated, and the main purpose of this fundraising is to invest in ranch and replenish cash flow. In the announcement on February 26, Zhongding attributed the reasons for the termination of the stock's issuance to "business development needs and long-term strategic development plans."
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