Bestore Co., Ltd.: Multiple crises lead to halving of market value, how can the new "novice" chairman break the deadlock?

Recently, the domestic leading enterprise in leisure snacks, Bestore Co., Ltd. (603719.SH), has been caught in a whirlwind of public opinion. On one hand, the company has been warned by regulatory authorities for violations by major shareholders. It is worth noting that Bestore Co., Ltd. hastily disclosed an equity change announcement under the regulatory warning letter, but did not disclose the fact that the company's major shareholder received a warning letter from the regulatory authorities. On the other hand, Bestore Co., Ltd. is facing the embarrassing situation of its first annual loss since its listing, and shortly after the announcement of the expected loss in performance, the Chairman and General Manager who had previously led the price reduction and reform of Bestore Co., Ltd., Yang Yinfen, announced her resignation. The situation faced by the newly appointed Chairman, Cheng Hong, does not seem optimistic. What is even more worrying for investors is that the newly appointed Chairman, Cheng Hong, who is also acting as the General Manager, has no prior experience as a manager of a listed company. Before taking office, her main job was as the director of the Wuhan University Institute for Quality Development Strategy. From academic leadership to senior management in a listed company is almost like a "novice" executive. It remains uncertain whether she can adapt to the role change and how she will lead Bestore Co., Ltd. out of its performance slump, face compliance challenges, and market tests. 1. Major shareholder's violation warning letter reveals governance concerns On March 14, the Hubei Securities Regulatory Bureau issued a warning letter to six shareholders of Bestore Co., Ltd., including the controlling shareholder Ningbo Hanyi Entrepreneurship Investment Partnership. The warning letter shows that Ningbo Hanyi, Ningbo Liangpin, Ningbo Hanliang, Ningbo Hanlin, Ningbo Hanning, and Ningbo Hanliang, six companies, collectively hold 44.22% of the company's shares. According to the announcement made by Bestore Co., Ltd. on March 7, 2023, Ningbo Hanliang, Ningbo Hanlin, Ningbo Hanning, and Ningbo Hanliang (hereinafter referred to as Ningbo Hanliang and its concerted actors) have terminated their concerted action relationship with Ningbo Hanyi and Ningbo Liangpin (hereinafter referred to as Ningbo Hanyi and its concerted actors). In the period from May 17 to December 5, 2023, these shareholders reduced their holdings in Bestore Co., Ltd. by 3.42% through block trading or concentrated bidding. After the above changes, the stakes held by Ningbo Hanyi and its concerted actors in Bestore Co., Ltd. decreased from 44.22% to 38.36%, with an equity change ratio of 5.86%; while the stakes held by Ningbo Hanliang and its concerted actors in Bestore Co., Ltd. decreased from 44.22% to 2.43%, with an equity change ratio of 41.79%. When the stake held by these shareholders in Bestore Co., Ltd. changed by 5%, they did not timely disclose the equity change report. In addition, on June 18 and 19, 2024, Ningbo Hanyi reduced its holdings by 584,300 shares through concentrated bidding, accounting for 0.15% of the total share capital of the company. When reducing its stake in Bestore Co., Ltd. from May 2023 to June 2024, the shareholders did not timely disclose the report when the equity change ratio reached 5%. The actions of the six shareholders mentioned above violated the provisions of Article 14 and Article 15 of the "Regulations on the Acquisition of Listed Companies" (CSRC Order No. 166), and therefore, the Hubei Securities Regulatory Bureau issued an administrative supervision measure in the form of a warning letter. It is worth noting that the fact that the major shareholder of the listed company has been subjected to administrative supervision measures has not been disclosed by the company. Among the six shareholders of Bestore Co., Ltd., Ningbo Hanyi and its concerted actors are still the controlling shareholders of the listed company. According to the disclosure in the equity change announcement by Bestore Co., Ltd., the main person in charge of Ningbo Hanyi is Pan Meihong, and the main persons in charge of Ningbo Liangpin are Yang Hongchun, Pan Meihong, and Yang Yinfen, all of whom are the actual controllers or related persons of the listed company. The violations of equity changes in this instance have exposed the weak compliance awareness of the major shareholders of the listed company, which may further erode investors' trust. 2. Performance shows the first annual loss since listing, price reduction strategy backfires on gross profit margin The 2024 performance forecast of Bestore Co., Ltd. shows that the net profit attributable to the parent company for the full year is expected to be a loss ranging from 25 million to 40 million yuan, while the non-net profit is expected to be a loss of 50 million to 70 million yuan, marking the first annual loss since Bestore Co., Ltd.'s listing in 2020. However, it should be noted that Bestore Co., Ltd.'s performance in each quarter of 2024 has been consistently disappointing. Following a loss of 11.02 million yuan in the fourth quarter of 2023, the net profit attributable to the parent company for the first to third quarters of 2024 were 62.48 million yuan, -38.59 million yuan, and -4.50 million yuan respectively, indicating a significant loss in the fourth quarter as well. Behind the performance "waterloo" is the failure of the "price reduction without reducing quality" strategy that the company launched to cope with competition. In 2023, under the leadership of the former Chairman Yang Yinfen, Bestore Co., Ltd. announced an average price reduction of 22% for 300 products, with a maximum reduction of 45%. Although this stimulated short-term sales, it led to a decline in gross profit margin from 27.75% in 2023 to 26.84% in the first three quarters of 2024. Combined with factors such as reduced government subsidies, Bestore Co., Ltd.'s profit margin has been severely squeezed, making its loss in performance in 2024 unsurprising. In addition, the company's revenue has been shrinking in recent years, with a 14.76% year-on-year decrease in 2023, and an 8.66% decrease in the first three quarters of 2024, totaling only 5.48 billion yuan. In other words, the strategy of "exchanging price for quantity" attempted by Bestore Co., Ltd. has not been effective. This has made the already declining profit scale of Bestore Co., Ltd. even more severe. The net profit attributable to the parent company of Bestore Co., Ltd. increased by -46.26% in 2023, further expanding in 2024.89.86% by the end of the first three quarters of 2024.As a result, the performance of Bestore Co., Ltd. further "collapsed". 3. The former chairman Yang Yinfen resigned, and the prospect of amateur Cheng Hong "rescuing" is unclear Strategic mistakes have led to a sharp decline in the company's performance, and a person must be held accountable for this in a listed company. Just over a month after Bestore Co., Ltd. issued a profit warning for 2024, on March 3rd, Bestore Co., Ltd. announced that Chairman and General Manager Yang Yinfen resigned due to "personal reasons". Although the company's announcement praised Yang Yinfen, even stating: "The company and the Board sincerely thank Mr. Yang Yinfen for his hard work and contributions during his tenure, and specially award him the title of Honorary Chairman of the company." However, there is no doubt that Yang Yinfen also bears responsibility for Bestore Co., Ltd.'s current dismal performance. What surprised the market and investors even more was that the announcement from Bestore Co., Ltd. stated that the 62-year-old director of the Quality Development Strategy Research Institute of Wuhan University, Cheng Hong, would take over as chairman and act as CEO. However, Cheng Hong has not previously operated the management of a listed company, mostly serving as an independent director of other listed companies or as a director of Bestore Co., Ltd. Not only does he lack experience in company management, but he may also lack an understanding of the strategies and tactics in the fast-moving consumer goods industry. To have such an "amateur" take over as the leader of Bestore Co., Ltd. in the face of the current operational difficulties, it is likely that most people will hold a skeptical attitude. 4. Multiple crises compounded with shareholders reducing their holdings, causing the stock price market value to be "halved" With the operational and performance crises, coupled with the turmoil in senior management, another major shareholder of the listed company, Deyang Limited, with a 19.16% stake, announced a reduction of up to 12.03 million shares within three months in February of this year. It really is a "leaking ship facing headwinds", if even one's own major shareholder doesn't have confidence in the listed company? According to public information, since the peak stock price of 87.24 yuan/share in 2020, the market value of Bestore Co., Ltd. has evaporated by over 90%. As of the closing price on March 28, 2025, it was only 12.42 yuan/share, with a total market value of less than 5 billion yuan. Previously, Bestore Co., Ltd.'s shareholders had reduced their holdings multiple times, such as nearly selling off by Gao Ling Capital, and Deyang Limited cumulatively reducing its holdings by over 14%. The reduction in holdings by major shareholders has formed a vicious cycle with negative performance news. The positioning of "natural healthy snacks" proposed by the new chairman Cheng Hong, how to balance between low-price competition and quality positioning, is still unknown. This article is reproduced from the WeChat public account "Observation Number Nine", GMTEight editor: Chen Yufeng.