Event: we recently conducted a visit to Huaiji Mountain.
Company channel model and main sales area: at present, it is mainly distribution mode, and the main sales area is in Zhejiang Province, accounting for more than 60% of sales revenue. In addition, Jiangsu Province and Shanghai are both mature markets of the company, with sales ratios of 16% and 10% respectively. By the end of 2018, the number of dealers in Zhejiang, Jiangsu and Shanghai was 428, 183 and 101 respectively, accounting for 62.5% of the total number of dealers. Beyond the mature market is the nurturing market, including Anhui, Fujian, Guangdong and other provinces. Nurturing market is based on the development of dealers, steady channel layout, so that consumers can see, buy and drink.
Product layout and price policy: the company puts forward the slogan of "new national wine new marketing, new consumption new culture", supplemented by the logic of raising the price of tourist yellow rice wine is different from that of white wine: there are many product lines in Huaiji Mountain and other yellow rice wine industry. it is difficult to raise the price of products generally. Unlike liquor, yellow rice wine can only develop higher-end new products to enhance value. At present, the company's strategy is to make low-end products and middle and high-end brands. The middle and high end of the pure 5 years, a year sales of about 3 million cases, the product has gained a certain market share. In 2017, the company launched a more high-end yellow rice wine product pure eight years. The average gross profit margin of middle and high-end products is 40%, which brings a certain improvement to the company's overall gross profit margin.
The company raised the price in 2017, mainly due to the low prosperity of the industry, and the failure to raise the price of yellow rice wine is disadvantageous to the channel and brand image. Under the leadership of the government, the yellow rice wine industry carried out a unified price increase, which was first started by the industry leader Guyue Longshan. It is a trend to raise prices in the future, but it is less likely to raise prices sharply in the short term.
Research conclusion and profit forecast
Recently, the company's controlling shareholders were involved in disputes over loan contracts, and their shares were frozen in April and lifted from the judicial freeze in November. Although the shareholder disputes have little impact on the fundamentals of the company, the tight cash flow of the controlling shareholders may still become a suppressing factor. It is estimated that the EPS from 2019 to 2021 is 0.30,0.33 and 0.35 yuan respectively, and the corresponding PE from 2019 to 2021 is 27.6,25.5,23.9 times, respectively. Combined with this survey, we temporarily give the company a "neutral" rating.
Risk tips: food safety risk; high-end promotion is not as expected; controlling shareholder loan dispute.