COFCO Packaging will invest 2 billion yuan in Qingyuan JDB, in the form of cash and can supply, acquiring a 30.58% stake upon completion, with the investment to be made within one and a half years. Investor Q&A: 1. Will the company position itself as a financial investor or will it have some influence on JDB's operations? COFCO Packaging: We will still be at the board level; we will appoint directors, communicate on decisions, but we will not interfere in daily operations. COFCO Packaging fully trusts JDB in marketing and channels, and we will mainly cooperate with JDB at the capital operation and support level. 2. Why is JDB willing to let the company invest on such favorable terms? COFCO Packaging: The two companies have a long history of cooperation, and the cooperation has always been very pleasant. Previously, JDB faced some difficulties, such as various lawsuits. They also hoped to find a partner with a central enterprise background that fits well and shares a common vision to expand the incremental market. Therefore, JDB was more about finding a good partner, putting economic interests second. This may be the reason JDB chose us. 3. What percentage of JDB's two-piece can sales does it account for? Does the company's investment in JDB mean it can have investment returns of more than 2 billion yuan per year? JDB accounts for about 30% of COFCO's two-piece can business; our investment in JDB will be completed within one and a half years, and we expect investment returns of 10% of the funds in place. If all 2 billion yuan is in place, subsequent investment returns are expected to be over 2 billion yuan. 4. What is the current revenue and net profit of Qingyuan JDB's concentrate? 6-7 billion revenue, 1.3-1.5 billion net profit. What is the pace of the company's capital increase? It is expected to be in three stages: the first stage will invest 800 million yuan, and the second and third stages will each invest 600 million yuan. Each stage will be matched according to the ratio of cash and in-kind contributions. 5. Regarding the injection of trademark assets, is the JDB trademark complete and full rights? What is the approximate situation of the 3 billion asset evaluation? Regarding the trademark evaluation price, we cannot disclose it due to commercial confidentiality and confidentiality principles. What can be disclosed is that the asset evaluation price is higher than the current transaction price, and JDB's rights are very complete. 6. Is Qingyuan JDB the only concentrate platform for JDB? Yes, it is the only one, an irrevocable and exclusive platform. 7. After the increase in can supply cooperation with JDB, can existing production capacity meet JDB's demand? The capacity expansion plan disclosed at the mid-year report meeting in August this year has already anticipated the increase in JDB's demand. We have newly integrated 3 billion cans of capacity this year, and the capacity and demand increase and expansion are very well matched. 8. After the company invests in Qingyuan JDB, what changes will it bring to Qingyuan JDB? We believe that JDB's scale will increase significantly, and the net profit margin will benefit from the company's refined management output, leaving room for improvement. 9. If Qingyuan JDB's dividends to the company are not as expected, does the company have the right to require JDB to buy back? If Qingyuan JDB's dividends to the company are not as expected, the company can require JDB to raise funds through various channels to buy back shares and pay investment returns. At the same time, the company can also choose to acquire more equity in JDB through agreement. Currently, it seems that Qingyuan JDB's underperformance is a small probability event. 10. What will be the net profit margin level for the company's can supply to JDB? The company's two-piece can gross margin is at the level of 18%-20%, and the supply to JDB will also be expected at this level. 11. What method is used to evaluate the asset value of Qingyuan JDB? It is evaluated using the cost method. Qingyuan JDB's vision is to achieve a business model like Coca-Cola's. A Coca-Cola company controls the concentrate and brand, which are core assets, and other companies participate in local bottling. In the future, JDB will also follow this model. 12. Qingyuan JDB's net profit from selling concentrate is 1.3-1.5 billion, and in the future, trademark and brand will be injected to increase profits. To meet the company's 10% investment return, at least 2 billion profit per year is needed. Can this be achieved? In the past, JDB was limited by historical reasons such as legal lawsuits, but now there are no legal issues. Combined with the company's support to JDB, JDB's sales are expected to increase in the future, thereby driving the growth of concentrate profits. We are very optimistic about Qingyuan JDB's profitability prospects. 13. Management's shareholding has reached the unlocking period. Are there any plans to reduce holdings in the future? We have a shareholding management committee that needs to vote and hold meetings to decide. Some colleagues may have reduction needs, but it is certain that we will not reduce holdings through the secondary market. 14. What will be the future relationship between the company and China Foods? Will JDB have subsequent cooperation with China Foods? At present, there is no substantive cooperation between JDB and China Foods, but the possibility of future cooperation cannot be ruled out. As long as it is good for the brand and the industry, COFCO Packaging will always maintain an open attitude. This is the content of today's 906 investor Q&A regarding the investment in Qingyuan JDB. For 906, the investment in Qingyuan JDB is a substantive positive, significantly improving the can main business, and also holding a strategic investment in the core concentrate assets including the JDB brand, with an annual return of 2 billion yuan. From the disclosed data, the Qingyuan concentrate factory uses 5% of JDB Group's sales revenue to achieve 20% of JDB Group's profits, with a net profit margin as high as 20%, undoubtedly the highest quality asset. From the perspective of COFCO Group's professional positioning, 906 is engaged in the packaging main business, and the investment in JDB stops here. For Chen Hongdao, this plan is also very good. He still holds 70% of JDB's core assets (brand and concentrate), and has embraced the central enterprise, and it is expected that his personal issues will be properly resolved. In the above Q&A, for those concerned about 506, it is recommended to focus on Q&A items 11 and 14. Item 11: JDB hopes to imitate Coca-Cola's profit model, which means that JDB Group's brand and concentrate assets are placed in Qingyuan JDB, shared with 906, and the remaining nationwide bottling plants and marketing channel teams are likely to be injected into 506 following the Coca-Cola model! JDB's willingness to refer to Coca-Cola's profit model clearly indicates that further capital operations with 506 will occur in the future. Item 14 actually affirms this possibility. COFCO used the Coca-Cola model to persuade Chen Hongdao. The first step was to let 906 participate in JDB's core assets; the next step should be for 506 to take over JDB's production and marketing assets, which is exactly what 506 needs most to grow Monster Beverage. It is estimated that the remaining beverage bottling plants and marketing channel teams of JDB Group will be injected into 506, and JDB shareholders may even participate in 506's mixed-ownership reform. Looking ahead to 506, the integration prospects are gradually becoming clear. After stripping non-beverage assets such as Fulinmen and liquor, it will add on the beverage main business. The upcoming mixed-ownership reform is very much worth looking forward to. Coca-Cola will participate in 506's mixed-ownership reform, swapping its stake in China Coca-Cola for shares in 506's listed company. Will JDB come along? And is $Baiyunshan(SH600332)$, which is suspended today, considering bringing out Wang Laoji? 506's mixed-ownership reform is a big show. On the occasion of President Trump's visit to China, it became the first Chinese state-owned enterprise mixed-ownership reform with an American company (Coca-Cola) participating. China's Belt and Road needs American support, and American corporate interests also need China's care. As a representative of American culture and influence, will Coca-Cola participate in the mixed-ownership reform of state-owned enterprise 506 and then join hands with 506 to lay out and expand the Belt and Road market? 506 joins hands with Coca-Cola to acquire Chinese beverage brands. JDB is willing to develop according to the Coca-Cola model. What about Wang Laoji? Can it also consider using the Coca-Cola model to jointly grow Chinese herbal tea? The main ingredients of Coca-Cola's formula are coca leaves and kola nuts, which is the origin of Coca-Cola. Therefore, Coca-Cola is actually a plant-based herbal tea. Wang Laoji is also called "China Cola" abroad. If JDB agrees to join the COFCO-Coca-Cola system to grow Chinese herbal tea, then should Wang Laoji also participate? If JDB is willing to join the COFCO-Coca-Cola system to develop herbal tea, from the current supply-side reform perspective, Wang Laoji's independent development of herbal tea seems somewhat "overcapacity." Is this the reason for Baiyunshan's suspension? Will Chinese herbal tea give birth to a "China's magical tea"? Let's wait and see. Editor's PS: Facts prove that COFCO's sale of Changcheng Wine Industry was not only for Coca-Cola, but also for JDB. For a detailed analysis, please look forward to the original article to be launched by New Distribution. 2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme of "New Forces, New Ecology," inviting domestic 1000+ distributors, 500+ brand owners, 200+ B2B platform founders, 100+ investment and financing institutions to jointly explore the new chapter of cross-border integration! Click the link below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum -END-