Shede Spirits (SH:600702) Zhong Jin Zai Xian·2025-11-30 02:23Core Viewpoint - The article discusses the significant decline in the performance of Shede Liquor due to weak consumer demand and governance issues, leading to a drastic drop in stock price and market capitalization, with a focus on the company's failed high-end strategy and internal conflicts among stakeholders [1][4]. Financial Performance - Shede Liquor's revenue fell to 5.357 billion yuan in 2024, a 24% decrease, with gross margin dropping to 65.5%, the lowest in eight years, and net profit margin at only 6.35% compared to the industry average of 14.95% [1][2]. - The company's core product, "Taste Shede," suffered due to price wars, with mid-to-low-end products now accounting for 35% of sales, an increase of 8 percentage points from 2023 [1][2]. - The company experienced a significant increase in inventory turnover days from 356 to 939 days, with inventory reaching 5.219 billion yuan, constituting 70% of current assets [6][7]. Governance Issues - The governance structure is characterized by a power struggle between the controlling shareholder, Fosun Group, and local state-owned assets, leading to fragmented decision-making and strategic short-sightedness [4][9]. - The company has seen a significant increase in employee numbers (from 6,630 to 9,816, a 48% rise) but with low revenue per employee of 561,000 yuan, indicating inefficiency [2][6]. - The management's incentive structure has failed, with stock options set at low performance targets, resulting in a lack of accountability and a significant drop in net profit margin from 30.38% in 2023 to 6.35% in 2024 [3][6]. Strategic Failures - The company's high-end strategy has been ineffective, with continued price increases leading to excess inventory rather than sustainable growth [6][8]. - The company has engaged in non-core expansions, such as tourism projects, which have long payback periods and are seen as a means for local government to achieve performance metrics at the expense of shareholder value [12][13]. Stakeholder Dynamics - The relationship between Fosun Group and local state-owned assets has created a "benefit alliance," where both parties prioritize their interests over those of minority shareholders, leading to systemic neglect of their rights [9][10]. - Frequent related-party transactions have resulted in risk transfer and asset depletion, with the company becoming a platform for various interests rather than focusing on its core business [10][14]. Conclusion - Shede Liquor has become a platform for various stakeholders to extract value, with the need for a restructuring of governance mechanisms and a return to core operations to avoid further deterioration of the company's foundation [14][15].