Changyu is a well-deserved leader in the wine and brandy industry. Facing a period of downward adjustment in the industry, the company's business resilience and advantages are reflected in its strong brand strength and channel control. Looking back, the company is also actively seeking new changes in organizational structure optimization, product structure upgrades, etc., and is looking forward to the implementation of the results of the company's reforms.

The bottom of the wine industry has been adjusted, the pattern has improved marginally, and the strength of the leaders has been upgraded. China's wine production and sales declined rapidly after 17 years. Currently, production and sales are close to the level at the end of the last century, close to the bottom. In recent years, the weak position of domestic alcohol has improved marginally in terms of structure, small and medium-sized enterprises have accelerated their liquidation, the resilience of leading company Changyu has been highlighted, and its share has continued to rise. In terms of consumer trends, demand for high-end wine has not been clearly suppressed, and the expansion of the wine atmosphere is favorable due to healthy demand from drinking groups and scenarios such as self-drinking and meal preparation. Domestic leaders are expected to seize the opportunity, develop high-quality products through circle marketing, and rely on scenario-driven expansion.

The brandy industry is still expanding, taking advantage of quality-driven and regional expansion opportunities. The CAGR of the Chinese brandy market reached 8% in 15-22, mainly driven by high-end cognac. The regional market has formed a strong understanding. Currently, it is still in the phase of rapid expansion, and the demand side of high-end cognac is strong. The opportunity for domestic brandy is, on the one hand, to be driven by product strength to seize the share of industry expansion, and on the other hand, to cultivate an empty market consumption atmosphere through channel advantages and accurate circle marketing cultivation.

The brand is deeply rooted in the hearts of the people, and the channel precision is sinking. After 100 years of development, the company's brand image is deeply rooted in the hearts of the people, and the terminal sales consumer recognition rate is high; in recent years, it has actively voiced its influence on the international stage.

The channel network is sophisticated and perfect, the density can reach the county level, the number of dealers is large, the cooperation time is long, and the loyalty is high, and there is a foundation for product upgrades and promotion to reach consumers.

The century-old brand is seeking change and innovation, and is looking forward to the results of the reform. Looking at the moment, the company is also actively seeking changes and innovation in organizational structure optimization and product structure upgrades: 1) in terms of organizational structure, dividing into six major business divisions and increasing investment to focus on core strategic brands such as Longyu, Winery, Jiebainer, and Keya; 2) In terms of product style, the “three major focuses” strategy tilts superior resources towards core brands and key markets, and actively invests in community marketing to accelerate product structure upgrading.

Investment advice: Century-old brands seek change and seek new results. The wine industry is bottoming out. In the short term, the sales volume of the company's wine business is stable. Revenue is expected to grow steadily, driven by structural upgrades, and the brandy business revenue is expected to grow rapidly as the industry expands. Considering that the company's capital expenditure remains at a stable level, the profit level is expected to pick up due to product structure upgrades and scale effects. In the short term, the company will increase circle marketing to promote high-end products, and it is expected that it will still increase its investment in market expenses, and the management cost ratio is expected to remain stable under the implementation of cost reduction and efficiency. EPS is expected to be 0.61, 0.69, 0.80 in 23-25. This is the first coverage, and no rating will be given yet.

Risk warning: The recovery of the scene falls short of expectations, low-price imported alcohol disrupts the market, and the expansion of the circle falls short of expectations, etc.