Price increase incident: According to a report on Weijiu's official account, starting February 5, the factory price of the core single product Eighth Generation Wuliangye will increase from the current 969 yuan to 1,019 yuan, an increase of 50 yuan, an increase of about 5%. The retail price has not been adjusted this time and is still 1,499 yuan.

The price increase was in line with market expectations, and early preparations were made to achieve smooth verification. On the one hand, the factory price of Maotai liquor increased by about 20% to 1,169 yuan at the end of November 23, opening up room for the rise in high-end liquor prices, which has some guiding significance; on the other hand, the 2023 Wuliangye 12.18 conference has already released a signal to take the opportunity to moderately adjust the factory price of the 8th generation Wuliangye.

We believe that Wuliangye's price increase is expected to help achieve its annual performance goals, mainly benefiting from the following points:

① Promote the gradual return of the price of Wuliangye products to value. We believe that this slight price increase of 5% fully takes into account the relationship between our brand power and market supply and demand, avoids negative effects at the dealer level that may be caused by excessive price fluctuations, and provides sufficient space for the company to resolve resistance at the dealer level through channel policies;

② Accurately grasp peak season points to reduce resistance brought about by price increases. The time point for this price increase is 4-5 days before the Spring Festival. Overall sales are at their peak. It is expected that some inventory will be absorbed to reduce pressure on dealers and effectively resolve consumer resistance caused by price increases;

③ The 1218 conference proposed a series of policies to increase dealer profits, which is expected to boost market confidence.

Profit forecast: We believe that Wuliangye's current price increase may establish strong stability for 24-year performance growth. We expect revenue for 2023-2025 to be 828/928/103.5 billion yuan, up 12%/12% year on year, and net profit to mother of 302/343/38.8 billion yuan respectively, up 13%/13% year on year, and corresponding PE is 16X/14X/12X respectively.

Risk warning: weak consumption; changes in industry policies; increased industry competition; recovery in liquor sales falls short of expectations