The rice wine industry has been depressed for many years due to various factors such as the external environment, uniform supply, and competitive share seizure. The pain points are mainly reflected in the low product structure and narrow consumer base, which has led to weak business operations. However, the prolonged decline in the industry has actually led to an increase in concentration, and the leaders are expected to drive the industry out of the bottom. Looking at the present, Guyue Longshan is focusing on high-end single-product domestic brewing in 1959, and empowering channels through high-visibility displays, tasting room experiences, and detailed support measures to enhance category awareness through means such as “Vietnam wine travels the world” and online live broadcasts. Furthermore, the company further rationalized its management mechanism this year, and management jointly increased its holdings to boost confidence. We expect the company to move the product structure upward at a more integrated high-end pace and improve profitability through cost reduction and efficiency measures. The short-term recommendation is to focus on the performance of the rice wine season before the Spring Festival. In the medium to long term, the company still needs to sort out the overall product structure and improve the price band layout. Furthermore, there is room for further strengthening terminal momentum, so it is recommended to continue to focus on the improvement process. We expect the company's revenue to increase by 5%/7%/7% in 23/24/25, respectively, and net profit growth of 8%/7%/18% respectively (after deducting compensation). The target price for initial coverage will not be granted yet.

After years of poor quality and inefficient development, the leading edge has brought opportunities. Rice wine is a veritable national liquor in China, but in recent years, it has been affected by various factors such as the external environment, uniform supply, and share capture of competing products, etc., and development has been weak. The industry has been competitive at low prices for many years, and consumer development efforts are insufficient. However, rice wine itself has health-care properties, has established a number of consumer groups that value it, and also caters to current consumer health and wellness needs. The prolonged decline in the industry has actually increased concentration. The long-term decline in the industry has actually led to an increase in concentration. The high-end market has brought opportunities, and there is also plenty of room for the penetration rate and awareness of peripheral markets to increase.

Ancient Yue Longshan: Gathering the high-end and actively seeking change. 1) Product: Strive for structural optimization to create high-end single products.

In recent years, the company has gradually adjusted its product structure to create the “National Brew 1959” series of single products, and launched the “Only Green, Only This Green, This Green Jade” co-branded Guochao IP product in '22. Currently, it has entered the business and group buying scenarios well, and consumer satisfaction is high. 2) Channel: Strengthen the experience and cultivate high-end carriers. Through offline channels, the company uses high-visibility displays to increase product exposure, enhances terminal control through refined support measures, and focuses on linking resources to the Chamber of Commerce and some high-end liquor dealers. In addition, the company used the tasting room as a carrier to enhance experience and promotion, and the model market achieved good results. Online channels, and professional teams have been formed to reach cooperation with leading anchors one after another, and the live e-commerce results are good; 3) Marketing: More wine goes all over the world, driven by scenarios. In 2020, the company restarted the “Vietnam Wine Tour the World” strategy, entered many cities and regions in Jiangsu, Zhejiang, and Shanghai, and reached cooperation with local dealers to create sample markets. This year, it continued to expand into overseas markets. Grassroots research reported that many regions outside the province were developing well. 4) Management: The adjustment mechanism is streamlined, and the assessment settings are more active. At the beginning of the year, the company adjusted that group leaders were directly responsible for the company's work and strengthened efficient management. At the same time, internal assessments also emphasized the implementation of individuals and focused on high-end categories. The collective increase in management holdings in June further boosted confidence.

Investment advice: The high-end is gradually gaining strength, and performance is expected to improve. The company's low and scattered product structure clearly limits performance. The current adjustments have achieved certain results, and there is still room for further growth in the future.

The short-term recommendation focuses on the performance of the rice wine season before the Spring Festival, and in the medium to long term, it is recommended to sort out the product structure, improve the price band layout, and drive the product structure upward at a more integrated high-end pace. At the same time, as an important promotion medium, terminal stores still have room to strengthen their momentum. It is recommended to continue to pay attention to the improvement process. We expect the company's revenue to increase by 5%/7%/7% in 23/24/25, respectively, and net profit growth of 8%/7%/18% respectively (after deducting compensation). The target price for initial coverage will not be granted yet.

Risk warning: high-end product promotion falls short of expectations, peripheral market expansion falls short of expectations