Bestore: Multiple crises have led to a halving of market value again. How will the new "ordinary" chairman break the deadlock?

Recently, the leading domestic snack company Bestore (603719.SH) has been caught in a whirlpool of public opinion. On one hand, the company has been warned by regulatory authorities due to violations by its controlling shareholder. Notably, Bestore hurriedly disclosed an equity change announcement only after receiving the warning letter from the regulatory authorities, but did not announce the fact that its controlling shareholder received the warning letter.

On the other hand, Bestore is facing the embarrassing situation of its first annual performance loss since going public. Shortly after the announcement of the expected performance loss, the chairman and general manager Yang Yinfeng, who previously led the price reduction and reform at Bestore, announced his resignation. The newly appointed chairman Cheng Hong is clearly facing an unfavorable situation.

What worries investors even more is that the new 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, he was the director of the Quality Development Strategy Research Institute at Wuhan University. Transitioning from an academic leader to a senior executive in a listed company, he is almost a "novice" executive. It remains to be seen whether he can adapt to this identity change and how he will lead Bestore out of the performance quagmire, address compliance challenges, and meet market tests.

1. Governance Concerns Exposed by Violations of Controlling Shareholder and Disclosure Gaps

On March 14, the Hubei Securities Regulatory Bureau issued a warning letter to Bestore and six shareholders, including its controlling shareholder Ningbo Hanyi Venture Capital Partnership.

The warning letter indicated that six companies, including Ningbo Hanyi, Ningbo Bestore, Ningbo Hanliang, Ningbo Hanlin, Ningbo Hanning, and Ningbo Hanliang, collectively held 44.22% of the company's shares. According to Bestore's announcement on March 7, 2023, the concerted action relationship between Ningbo Hanliang, Ningbo Hanlin, Ningbo Hanning, and Ningbo Hanliang (hereinafter referred to as Ningbo Hanliang and its concerted actors) and Ningbo Hanyi, Ningbo Bestore (hereinafter referred to as Ningbo Hanyi and its concerted actors) was terminated. Between May 17 and December 5, 2023, the aforementioned shareholders reduced their holdings in Bestore by 3.42% through block trades or centralized bidding.

After the aforementioned changes, the shareholding of Ningbo Hanyi and its concerted actors in Bestore decreased from 44.22% to 38.36%, with a change in equity ratio of 5.86%; the shareholding of Ningbo Hanliang and its concerted actors decreased from 44.22% to 2.43%, with a change in equity ratio of 41.79%.

The aforementioned shareholders did not timely disclose the equity change report when their shareholding in Bestore reached a change ratio of 5%. In addition, Ningbo Hanyi reduced its holdings by 584,300 shares through centralized bidding from June 18 to June 19, 2024, accounting for 0.15% of the company's total share capital. Because it did not timely disclose the report when the equity change ratio reached 5% during the period from May 2023 to June 2024. The actions of the six shareholders mentioned above violate Articles 14 and 15 of the "Measures for the Administration of the Acquisition of Listed Companies" (CSRC Order No. 166), and thus they have been subjected to administrative supervision measures in the form of a warning letter by the Hubei Securities Regulatory Bureau. It is worth noting that the listed company did not disclose the fact that its controlling shareholder was subjected to administrative supervision measures.

Among the six shareholders of Bestore, Ningbo Hanyi and its concerted actors are still the controlling shareholders of the listed company Bestore. According to the disclosure in Bestore's announcement on equity changes, the main person in charge of Ningbo Hanyi is Pan Meihong, while the main persons in charge of Ningbo Bestore are Yang Hongchun, Pan Meihong, and Yang Yinfeng, all of whom are actual controllers or related persons of the listed company.

The violations occurring in this equity change reveal the weak compliance awareness of the major shareholders of the listed company in capital operations, which may further undermine investor trust.

2. Performance shows first loss since listing; price reduction strategy backfires on gross margin

Bestore's 2024 performance forecast indicates that the annual net profit attributable to the parent company is expected to lose between 25 million and 40 million yuan, with the net profit excluding non-recurring gains and losses expected to lose even more, between 50 million and 70 million yuan. This marks the first annual loss for Bestore since its listing in 2020.

However, it should be pointed out that Bestore's profit performance in each quarter of 2024 has been unsatisfactory.

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 three quarters of 2024 was 62.48 million yuan, -38.59 million yuan, and -4.5 million yuan, indicating another significant loss in the fourth quarter.

Behind the "Waterloo" of performance is the failure of the company's "price reduction without compromising quality" strategy launched to cope with competition. In 2023, under the leadership of former chairman Yang Yinfeng, Bestore officially announced an average price reduction of 22% on 300 products, with the maximum reduction reaching 45%. Although this stimulated sales in the short term, it led to a decline in gross margin, dropping from 27.75% in 2023 to 26.84% in the first three quarters of 2024. Coupled with a reduction in government subsidies and other factors, Bestore's profit margin has been severely squeezed, making the loss in 2024 unsurprising.

In addition, the company's revenue has continued to shrink in recent years, with a year-on-year decline of 14.76% in 2023, and a further year-on-year decline of 8.66% in the first three quarters of 2024, totaling only 5.48 billion yuan. In other words, Bestore's attempt to "exchange price for volume" has also failed. This has further exacerbated the decline in the already shrinking profit scale of Bestore. The growth rate of Bestore's net profit attributable to the parent company has expanded from -46.26% in 2023 to -89.86% in the first three quarters of 2024 As a result, Bestore's performance has further "collapsed."

3. Former Chairman Yang Yinfeng Resigns, Outsider Cheng Hong's "Firefighting" Prospects Uncertain

Strategic missteps have led to a sharp decline in the company's performance, and someone must be held accountable for this in the listed company.

Just over a month after Bestore announced its expected loss for 2024, on March 3, Bestore announced that Chairman and General Manager Yang Yinfeng resigned due to "personal reasons." Although the announcement from the listed company contained many flattering remarks about Yang Yinfeng, it even stated: "The company and the board of directors sincerely thank Mr. Yang Yinfeng for his hard work and contributions during his tenure, and specially appoint Mr. Yang Yinfeng as the company's honorary chairman."

However, there is no doubt that Yang Yinfeng bears an undeniable responsibility for Bestore's current dismal performance.

What surprised the market and investors even more was that Bestore's announcement stated that 62-year-old Cheng Hong, the director of the Quality Development Strategy Research Institute at Wuhan University, would take over as chairman and act as general manager.

However, Cheng Hong has not previously operated a listed company's management; most of his experience comes from being an independent director of other listed companies or a director of Bestore, lacking practical experience in company management and perhaps not fully understanding the strategies and tactics of the fast-moving consumer goods industry.

With such an "outsider" taking the helm of Bestore, whether he can break the current operational predicament is something most people are likely to be skeptical about.

4. Multiple Crises Compound, Shareholders Further Reduce Holdings, Stock Price Value "Halved Again"

Amid the crisis in operational performance and turmoil in the executive team, another major shareholder of the listed company, Dayong Limited, which holds 19.16% of the shares, announced in February this year that it would reduce its holdings by no more than 12.03 million shares within three months.

Is it really "a ship leaking while encountering headwinds," with even its major shareholders losing confidence in the listed company?

According to public information, since the peak stock price of 87.24 yuan/share in 2020, Bestore's market value 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's shareholders had repeatedly reduced their holdings, such as Hillhouse Capital nearly liquidating its position, and Dayong Limited cumulatively reducing its holdings by over 14%. The shareholders' reductions have formed a vicious cycle with the negative performance of the listed company. The new positioning of "natural and healthy new snacks" proposed by the newly appointed chairman Cheng Hong, how to balance between low-price competition and quality positioning, remains uncertain.

This article is reprinted from the WeChat public account "No. 9 Observation," edited by Zhitong Finance: Chen Yufeng.