Incident: Starting from February 5, 2024, the factory price of the eighth-generation Wuliangye will be adjusted from 969 yuan/bottle to 1,019 yuan/bottle, an increase of 50 yuan, or about 5%. This price increase is about 2 years since the last time. The last price increase was at the end of 2021. The company raised the settlement price to 969 yuan/bottle (planned price 889 yuan/bottle, unplanned price 1,089 yuan/bottle, accounting for 2:3 inside and outside the plan). In December of last year, the company made it clear that the planned contract volume for the Eighth Generation Wuliangye will be reduced by 20%. The price of 969 yuan/bottle will be implemented before January 25, '23, and the repayment ratio will not exceed 60% of the annual contract volume. At the 12.18 conference, Zeng Congqin said that in the future, he will take the opportunity to adjust the price of the Eighth Generation Pu 5, and the current price increase is expected to come true.
Judging from the demand for price increases, in addition to providing performance contributions on the reporting side, price increases are expected to boost pricing and speed up repayments in the short term. In the long run, they are in line with the company's strategic demands. In the short term, as the good start continues to advance, and in the context of intensive payments and deliveries, general five batch prices in some regions are under pressure. Price increases can increase dealer inventory value and reduce dealer shipments at low prices. In addition, dealers will still be able to pay at the current price during the window period until the announcement of the price increase on February 5. It is expected that the price increase will also promote repayment. From a long-term perspective, the prices of the core single products of high-end wine established the brand's position in the industry, and Wuliangye followed Maotai in price increases after a period of deep adjustment. In the context of pressure on demand, if the company can stabilize the price market, or if Maotai had the same effect as stabilizing prices during the deep adjustment period and further distancing itself from other high-end wines, the price increase would be in line with the company's strategic goals.
Judging from the extent of the price increase, this price increase is relatively moderate, and the volume and price strategies are carefully balanced. Demand boom is a lever for the success of price increases, and determines whether wine companies are doing more with less or less. In a context where overall demand is still gradually recovering and prices are inverted, price increases have put a greater test to the overall strength of wine companies. However, since Maotai took control of the pricing power for high-end liquor, the historical average price increase for Wuliangye was 12%. This time, the price increase was about 5%. The price increase was not aggressive. The overall price strategy is cautious and cautious. Furthermore, after the deep adjustment period, Wuliangye raised prices several times with slight price inversions, and successfully reversed the price momentum through price increases. Therefore, it is expected that this price increase will play a role in driving upward price increases, while further opening up the price space for brands in the 1,000 yuan price band and below, boosting market confidence.
Profit forecast and investment advice: We maintain our previous profit forecast. We expect the company's net profit to be 303.45/348.21/39.817 billion yuan in 2023-2025. After the general five price increase expectations were implemented, the certainty of the company's performance growth was further clarified, giving the company 20 times PE in 2024, corresponding to a target price of 179 yuan, and maintaining the purchase rating.
Risk warning: The recovery in commercial consumption of liquor fell short of expectations, the general five batch prices fell short of expectations, etc.