Reviews:

The company's net profit turned loss into profit in 2012 mainly benefited from asset and equity transfers, and at the same time, main business growth was quite obvious.

It is expected that the fourth quarter of '12 will contribute significantly to profit in a single quarter. Total profit for the first three quarters of 2012 was -113.7 million yuan, which means that the main operating profit portion and non-operating income portion from the sale of assets and shares in the fourth quarter are expected to exceed 113.7 million yuan.

Asset and equity sales contributed nearly 80 million yuan in profit, greatly reducing the pressure on total profit losses of 113.7 million yuan in the first three quarters.

On December 20, 2012, the company announced that it had successfully sold Room 1A on the 1st floor of Shanghai Xintian International Building at a price of 54.25 million yuan (net book value of RMB 22.3326 million, assessed value of RMB 54.231,000, value added by comparison of assessed value and book value of RMB 31.902,500, with a value-added rate of 142.85 percent).

At the end of 2012, the company successfully sold 100% of the shares of its wholly-owned subsidiary Shanghai CITIC Guoan Wine Co., Ltd. (audited net assets of -10.711,400 yuan) at a price of 365.931 million yuan, contributing about 47.3045 million yuan; it sold equivalent claims against Shanghai CITIC Guoan Wine Co., Ltd. for 57.2715 million yuan.

These two sales of assets, claims, and shares contributed a total of 79.22 million yuan in non-operating income. The 8th and 9th floors of Xintian International Building, which are also to be sold (net book value of 308.66,800 yuan, assessed value of 594.64 million yuan, value-added value of 285.972 million yuan compared to book value, value-added rate of 92.65%) were not sold at the end of 2012 and are still being listed.

The company's sales of refined wine in 2012 increased significantly compared to 2011 (company announcement).

According to disclosed data, the overall sales volume of wine sales companies from January to October 2012 was 169.7 million yuan, an increase of 22.84 million yuan, an increase of 15.55% over the sales volume of 146.9 million yuan from January to October 2011. The construction and operation of experience stores in the Xinjiang region brought a growth rate of 71.54% to the region. From January to October 2012, customers in Xinjiang were 71.22 million yuan, an increase of 29.7 million yuan over the order volume of 415.52 million yuan from January to October 2011.

It is anticipated that in the last two months of 2012, the company may have acted in terms of sales policies, and the impact may be very strong in some regions, thus increasing sales in the fourth quarter.

Focusing on the 2012 annual report, how the company made a profit in the fourth quarter will be critical.

After the company's total profit for the fourth quarter is 79.22 million yuan after deducting the contribution of assets sold, it must not only achieve profit, but also make up for losses of 34 million yuan in the first three quarters, so sales data for the fourth quarter will be critical.

CITIC Group's support is expected to increase in the future. CITIC Group's alcohol purchases may be close to 50 million yuan in 2013. In 2011, CITIC Group purchased 10.46 million yuan of wine from the company. In 2013, the company plans to sell no more than 50 million yuan of wine to China CITIC Group Co., Ltd. and its subsidiaries, which is very aggressive. We expect improvements in company fundamentals.

On the one hand, some experience centers are quite effective. For example, the construction and operation of experience stores in the Xinjiang region brought 71.54% growth rate to the region. From January to October 2012, customers in Xinjiang were 71.22 million yuan, an increase of 29.7 million yuan over the order amount of 415.52 million yuan from January to October 2011.

As of October 31, 2012, 52 experience centers have been built, of which 52 have been opened. The Experience Hall integrates various functions such as display, tasting, and activities. It is a method commonly used in wine sales; it's just that the company named it Niya Royal Cellar (Experience Hall).

The company built the Niya Royal Cellar Clubhouse on the first floor of the headquarters, which is conducive to better showcasing the company. The clubhouse combines ancient and mysterious Niya culture with European classical horticultural design. It is a blend of history and modernity. Tradition and modernity intersect. It can be called a model wine club in the whole of Xinjiang. The clubhouse has a wine tasting room, a coffee bar, a cigar bar and a professional heated wine cellar. It provides a relaxed negotiation space and a professional wine tasting place for social elites. It is a place of choice for business, banquets, leisure and entertainment.

On the other hand, there have also been improvements in the company's internal management, but we believe the company's specific changes are yet to be further observed and determined.

Profit forecasting and valuation

We believe that Sun Yalei, the chairman of the company, is the general manager of CITIC Guoan, which is the majority shareholder, to help coordinate resources related to the large state-owned enterprise CITIC Group. The 150,000-mu vineyard base advertised by the company is basically close to or over 15 years old. The resource advantage is obvious. The valuation must take into account the determination of the majority shareholders and the advantages of the company's vineyard base. Since the current stock price is already reflected, the “increase in holdings” rating is maintained. Since the factors that led the company to turn losses into profits in the fourth quarter are unclear, the profit forecast has yet to be evaluated after the publication of the 12-year annual report.

Important matters of concern

Stock Price Catalyst (positive): The company's fourth-quarter sales exceeded expectations

Risk warning (negative): Reversing losses in 12 years contributed to earnings, in addition to nearly 80 million non-operating income, a large amount of other non-operating income