Incident: The company released its 2022 annual report and the first quarterly report for 23. It achieved total revenue of 980 million yuan in 2022, -7.04% year on year, achieved net profit of 75 million yuan, +19.05% year on year; achieved total operating income of 400 million yuan in the first quarter of 2023, -6.23% year on year, and achieved net profit of 77 million yuan, -29.46% year on year, in line with market expectations. At the same time, the company plans to distribute a cash dividend of 0.6 yuan (tax included) for every 10 shares.

The product structure has declined slightly, and the growth rate of e-commerce platforms is impressive. 1. In 2022, high-end alcohol (retail price ≥ 60 yuan/500 ml) and ordinary alcohol (retail price <100 yuan/500 ml) achieved revenue of 660 million yuan (-13.9%) and 220 million yuan (+4.8%) respectively, and the product structure was under slight pressure. 2. Looking at the subregion, the province achieved revenue of 630 million yuan (-10.7%), revenue from outside the province reached 310 million yuan (+4.2%), and the share of revenue (including e-commerce) outside the province increased 3.3 percentage points to 31.7%. The company responded positively to the impact of the epidemic and actively promoted online channels, and e-commerce platforms achieved sales revenue of 80 million yuan, an increase of 43.3% over the previous year. 3. In terms of the number of dealers, the number of dealers outside the province decreased by 36 in 2022, an increase of 40, a net increase of 4 to 517. The company continued to optimize the dealer structure, causing large changes in dealers.

The consumption scenario has been structurally restored, and profits are under pressure from falling gross margins. Year 22: Benefiting from exchange earnings, the financial expense ratio decreased by 2.2 percentage points to -2.1%, the comprehensive expense ratio decreased by 1.4 percentage points, and the net sales interest rate increased 1.9 percentage points to 7.5%. First quarter of '23:1. Consumption scenarios such as banquets and visiting family and friends during the Spring Festival took the lead in recovering. Business consumption gradually recovered after the Spring Festival. The different pace of recovery in various scenarios led to significant differences in sales of products at various price levels. Constrained by a slight delay in the recovery in sales of high-priced products, gross margin fell 4.5 percentage points to 63.6% year on year. 2. In terms of expenses, the total of the three fees increased 1.4% to 89 million yuan. Affected by the decline in revenue, the cost rate increased 2.0 percentage points year-on-year to 22.8%. 3. Overall, the company's net sales interest rate fell 6.4 percentage points to 19.5% year-on-year, and profits were under phased pressure.

The pace of in-depth adjustments is remarkable, and an upward inflection point in operations can be expected. The company focused on upgrading the product structure, continuously promoting marketing transformation, and comprehensively promoting the integration of wine tourism. The pace of in-depth adjustment was remarkable: 1. Focusing on Tianzhide, Guozhide, Human Morality, Export and Star Series products, actively laid out Human Virtue to seize the price of 150-200 yuan. Qinghai fully introduced Guozhidechen's products, and the pace of product structure upgrade is obvious. 2. Continuously optimize the quality of the dealer team, dig deeper into dealer group buying resources, and focus on promoting dealer transformation; putting expenses on consumers before investment. In 2022, 8 experience stores and 27 joint restaurants were developed to continuously enhance interaction with consumers and continuously optimize the consumer experience. 3. The company focuses on the three aspects of tourist population cultivation, community operation for tourism practitioners, and joint promotion of tourist attractions to strengthen the integration of wine tourism. With the recovery in tourism consumption, an inflection point in the company's operations can be expected to rise.

Profit forecasts and investment recommendations. EPS for 2023-2025 is expected to be 0.33 yuan, 0.54 yuan, and 0.79 yuan respectively, and the corresponding PE is 43 times, 27 times, and 18 times, respectively. The company benefits from consumption upgrades within the province and market development outside the province, is optimistic about the company's long-term growth capacity, and maintains its “buy” rating.

Risk warning: There is a risk of a sharp economic downturn, and the recovery in consumption falls short of the expected risk.