Shanghai Laiyifen once again promotes the "golden handcuffs" plan, lowering the difficulty of unlocking the "two choices" condition, exposing the embarrassing situation of competitors falling behind in performance.

This article is from "Securities Star", author: Liu Fengru Employee shareholding and equity incentive are referred to as the "golden handcuffs" of listed companies, and now Shanghai Laiyifen (603777.SH) is also going to put "golden handcuffs" on its employees. On the evening of May 22, Shanghai Laiyifen introduced an employee shareholding plan aimed at 230 board members, senior executives, core management (business) personnel, with a subscription price not lower than 60% of the average share buyback price of the company. Employee shareholding plans, as a form of incentive for employees, are usually interpreted positively by the market. On May 23, Shanghai Laiyifen fell by 2.45%, and the stock price boost effect was not significant. According to Shanghai Laiyifen's disclosed performance-based assessment criteria, unlocking conditions can be met as long as the revenue in 2024 exceeds 4.096 billion yuan or the net profit attributable is at least 68 million yuan. At the beginning of the listing, Shanghai Laiyifen's net profit attributable was already 134 million yuan. This either/or assessment method implies that even in the case of a loss, unlocking can be achieved as long as the revenue meets the target. These signs seem to suggest that Shanghai Laiyifen lacks confidence in its future growth prospects. Securities Star noted that this fundamental uncertainty may have stemmed from Shanghai Laiyifen's reduced online revenue last year, the sluggish performance of offline main stores, and falling behind in performance compared to peers. The subscription price not lower than 60% of the buyback price, "either/or" unlocking conditions According to Shanghai Laiyifen's disclosed second phase employee shareholding plan, the plan aims to raise a total of 201.10157 million yuan, with a maximum of 2.746538 million shares to be held, accounting for approximately 0.82% of the total share capital of the company as of the date of the employee shareholding plan announcement. The source of shares in this employee shareholding plan is Shanghai Laiyifen's A shares of common stock bought back through a designated account. According to the announcement, the holders of the second phase employee shareholding plan include directors, supervisors, senior executives, and core management (business) personnel of Shanghai Laiyifen (including subsidiaries). These individuals play a direct or important role in the company's core business development process. The proposed allocation table disclosed by Shanghai Laiyifen shows that 12 board members and senior executives, including Xu Saihua, Dai Yi, Zhang Qin, and Zhang Lihua, jointly plan to hold a maximum share of 292,000 shares, accounting for 10.63% of the employee shareholding plan; 218 core management (business) personnel plan to be allocated a maximum of 2.148 million shares, accounting for 78.21%. In addition, Shanghai Laiyifen has also set aside 306,538 shares currently reserved by the company's controlling shareholder Ewu Qiguan in advance for subscription funding, which does not have related voting rights before allocation and is not counted in the denominator of exercisable voting rights. As a "golden handcuffs" plan that binds employee benefits to the company's performance, employees naturally receive discounts. The subscription price for Shanghai Laiyifen's employee shareholding plan this time (including reserved shares) is set at 7.65 yuan per share, not lower than 60% of the average share buyback price of the company (12.75 yuan per share). The unlocking conditions are tied to performance, specifically: using Shanghai Laiyifen's 2023 operating income as the base, the 2024 operating income growth rate must not be less than 3%, or using the company's 2023 net profit as the base, the 2024 net profit growth rate must not be lower than 20%. Based on Shanghai Laiyifen's 2023 revenue of 3.977 billion yuan and net profit attributable of 57 million yuan, unlocking requires the 2024 revenue to exceed 4.096 billion yuan or the net profit attributable to reach 68 million yuan. In 2022, Shanghai Laiyifen's revenue and net profit attributable were 43.82 billion yuan and 102 billion yuan respectively. Compared to these figures, the performance-based assessment "threshold" does not seem high, even if there is a decline in performance. The either/or assessment method also means that even if there is a net loss, unlocking can be achieved as long as the revenue target is met. An industry insider believes that Shanghai Laiyifen may have concerns about its future growth prospects. Securities Star noted that in January last year, Shanghai Laiyifen terminated the first phase of the employee shareholding plan early. The reason was that the plan set performance targets at the company level, that is, "using the 2021 operating income of the company as the base, the 2022 operating income growth rate must not be less than 25% and the net profit must be positive," but the company expected that the company-level performance targets for 2022 would not be met, thus failing to realize the original intention of the first phase of the employee shareholding plan. After eight years of being listed, last year saw the first decline in revenue, with the e-commerce business continuing to shrink Shanghai Laiyifen was founded in 2002, focusing on the snack market. In October 2016, Shanghai Laiyifen went public on the Shanghai Stock Exchange, becoming the "top snack stock." Financial reports show that Shanghai Laiyifen achieved an operating income of 3.977 billion yuan in 2023, a year-on-year decrease of 9.25%; net profit attributable was 57 million yuan, a year-on-year decrease of 44.09%; and non-recurring net profit was 12 million yuan, a sharp decline of 80.43%. In its debut year of listing, Shanghai Laiyifen had a revenue of 3.236 billion yuan and a net profit of 134 million yuan. From 2016 to 2022, Shanghai Laiyifen's revenue overall showed growth, but the growth rate was not high, with only the growth rate exceeding 10% in 2017, reaching 12.35%, while other years were in the single digits. In 2023, Shanghai Laiyifen saw a decrease in revenue for the first time. The translation was done by a combination of machine translation and human revision to ensure accuracy.After going public, Ai Laiyifen's first revenue declined.Shanghai Laiyifen stated in the annual report that the decrease in revenue from specific channel group buying business in the Shanghai region, as well as the decrease in business scale due to strategic adjustments in some e-commerce businesses, led to a year-on-year decrease in the company's operating income and net profit. Shanghai Laiyifen's specific channel refers to sales channels including large customer group buying, distributors, and key accounts. In the annual report, Shanghai Laiyifen did not disclose details of the specific channel group buying business in the Shanghai region. According to media reports, in 2022, Shanghai Laiyifen, as one of the "supply guarantee units," delivered a total of 2.28 million supply guarantee orders. In 2023, Shanghai Laiyifen's special channel recorded a revenue of 215 million yuan, a decrease of 38.54% year-on-year. Apart from these factors that will not continue, Shanghai Laiyifen's performance is also not optimistic. Securities Star found that Shanghai Laiyifen's e-commerce revenue has been decreasing over the past few years. From 2021 to 2023, its e-commerce sector revenue was 543 million yuan, 502 million yuan, and 328 million yuan respectively, with year-on-year decreases of 8.58%, 7.54%, and 34.58% respectively. At a time when the industry is focusing on online channels, the substantial decline in Shanghai Laiyifen's e-commerce sales revenue exposes its weaknesses. Compared to the performance of its peers, Shanghai Laiyifen is falling behind. In 2023, the net profits of Bestore Co., Ltd. (603719.SH), Three Squirrels Inc. (300783.SZ), and Yanker Shop Food (002847.SZ) were 180 million yuan, 220 million yuan, and 500 million yuan respectively. In its 2023 financial report, Shanghai Laiyifen pointed out that the snack retail industry has strong seasonal characteristics, with peak sales seasons in the first and fourth quarters. However, in the first quarter of this year, Shanghai Laiyifen's operating situation did not improve. During the reporting period, its revenue decreased by 12.47% year-on-year to 1.061 billion yuan, net profit attributable fell by 13.9% year-on-year to 61.3118 million yuan, non-GAAP net profit decreased by 24.91% year-on-year to 47.1829 million yuan, and the gross profit margin dropped to 41.51%. Unable to expand beyond the Jiangsu-Zhejiang-Shanghai region, the goal of ten thousand stores falls short for Shanghai Laiyifen. For a long time, Shanghai Laiyifen's offline channels have been significantly stronger than its online channels. In 2023, Shanghai Laiyifen generated revenue of 2.57 billion yuan from retail stores and 731 million yuan from wholesale business through franchisees, higher than that from e-commerce channels. As of December 31, 2023, the total number of Shanghai Laiyifen stores reached 3,685, an increase of 63 stores from the previous year. Among them, there were 1,910 direct-operated stores, a decrease of 218 stores year-on-year; 1,775 franchised stores, an increase of 281 stores. Franchise stores accounted for 48%, with over 614 franchised signed stores throughout the year. From Shanghai Laiyifen's perspective, the focus on franchise stores is aimed at expanding nationwide and "moving out of Shanghai." In 2017, Shanghai Laiyifen launched the "Ten Thousand Lights" plan, with the goal of achieving ten thousand stores by 2023. However, based on the results of 2023, Shanghai Laiyifen is far from reaching this goal. In addition to the inadequate size of the store, Shanghai Laiyifen has still not been able to expand beyond the Jiangsu-Zhejiang-Shanghai region. During the reporting period, Shanghai Laiyifen had 1,539 stores in Shanghai (direct and franchise combined), 1,297 stores in Jiangsu, followed closely by stores in Zhejiang and Anhui, with 225 and 265 stores, respectively. Stores in other markets did not exceed one hundred. As the main revenue source for Shanghai Laiyifen, the income from the East China region decreased by 6.28% last year, with the company citing the impact of adjustments in direct-operated to franchise business. In its business plan, Shanghai Laiyifen stated that it will focus on the chain operation of "Ten Thousand Lights," and continue to promote the franchise-based chain model. However, the proliferation of snack retail stores has had a significant impact on Shanghai Laiyifen's expansion efforts. In 2023, new emerging bulk snack retailers such as Snacks Are Busy and Zhao Yiming have emerged, becoming the "new forces" in the snack industry. The heated competition in the bulk snack retail sector has accelerated the industry's "internal competition," with casual snack enterprises such as Bestore Co., Ltd. starting to heavily discount prices and Three Squirrels Inc. proposing a "high-end cost-effective" strategy. Facing the rise of the bulk snack retail model, Shanghai Laiyifen's chairman Shi Yonglei recently stated: "We reject low-level price competition and are committed to enhancing product value, providing consumers with products of higher cost-effectiveness and quality-cost ratio." He believes that with the trend of consumer stratification, competition is no longer limited to price, but more focused on the comparison of value and quality." However, whether Shanghai Laiyifen can accurately capture consumer preferences, drive sales to increase revenue, still remains a question mark. Inclined towards diversification, with minimal returns Shanghai Laiyifen, whose performance has been weak in recent years, has also been enthusiastic about diversifying its business. In June of last year, Shanghai Laiyifen signed a strategic cooperation agreement with Tencent, covering various digital applications in the snack food industry, as well as technology fields such as cloud computing, big data, and AI. Subsequently, Shanghai Laiyifen introduced the concept of "ChatGPT." The commotion brought by AI at that time led to a wave of increase in Shanghai Laiyifen's stock price, but whenThe stock price has once again dropped back to its original level.Shanghai Laiyifen's diversification, also includes the layout of categories such as alcoholic beverages and coffee. In 2021, the sauce-flavored hot trend in the liquor industry was very popular, and many listed companies have crossed over into "sauce-flavored" products. Shanghai Laiyifen revealed on the investor interaction platform in June 2021 that it had entered the sauce-flavored liquor market in 2020, launching the brand "Zui Ai" and it is already being sold through all channels. With this news, Shanghai Laiyifen's stock price rose by more than 60% in June of that year. The 2023 report showed that Shanghai Zui Ai Liquor Co., Ltd. had a revenue of 6.9131 million yuan, with a relatively small impact on overall revenue. Shanghai Laiyifen launched a coffee brand in 2021, and in 2023, this brand was upgraded to "Lai Ka". Regarding the coffee business, in December 2023, Shanghai Laiyifen stated on the interaction platform that the company owns the coffee brand "Lai Ka", which had entered over 500 Shanghai Laiyifen stores by the end of November 2023, selling through in-store displays and delivery services, covering the East China region including Jiangsu, Zhejiang, and Shanghai. Shanghai Laiyifen did not disclose the revenue from the coffee business. Following the footsteps of Wahaha Group and Wuliangye Yibin in the venture capital market, in January of this year, Shanghai Yongrui Tiancheng Private Equity Fund Management Co., Ltd. completed registration with the China Securities Investment Fund Association, with the controlling interests shown as Shanghai Laiyifen Co., Ltd. However, Shanghai Laiyifen's continuous exploration of diversification has not prevented a decline in performance. Faced with intensified market competition, shifts in consumer trends, and changes in distribution channels, the once "number one snack stock", when will it emerge from its pessimistic bottom? (This article was first published on Securities Star, Author | Liu Fengru) This article is reprinted from "Securities Star", Author: Liu Fengru