Incident: On March 7, Wuliangye issued an action plan in response to the Shenzhen Stock Exchange's “Double Improvement of Quality and Return” campaign. The plan enhances the quality and return of the company from the five aspects of “strong development, strong compliance, strong return, strong confidence, and strong communication”.
Strengthen development, consolidate the basic market, enhance the power source, and create a growth pole. Development will unfold in three areas: basic markets, power sources, and growth poles. 1) Basic plan: ① Improve quality management through a digital traceability system; ② By strengthening existing production capacity and increasing the rate of famous wine, the company's current famous wine rate is 15-20%; ③ The company promotes production capacity construction through a series of “high-quality multiplication projects”. In 24, the company will promote the full commissioning of the first phase of the 100,000 ton ecological winemaking project to provide a foundation for development. 2) Power source: ① Increase exposure and strengthen consumer awareness by sponsoring advertisements such as the CCTV Spring Festival Gala, etc.; ② Strengthen the main regional campaign. Out of Wuliangye's 21 marketing regions in '23, 14 regions achieved positive growth in marketing, using big data to promote digital marketing transformation; ③ promote “intellectual transformation and digital transformation” to enhance scientific and technological support. 3) Growth pole: ① Optimize product layout, continuously improve Wuliangye's “1+3” product system and Wuliang strong wine product system, continue to increase promotion and promotion at 39 degrees and 1618 over the past 23 years, and strengthen the cultivation of young consumer groups. In terms of foreign markets, the company promotes “Hemei Global Tour”, with the chairman leading a team to inspect multi-country markets to promote Wuliangye to the world; ② promoting the balanced development of traditional channels, direct management channels, and emerging channels; 3) optimizing the scene layout and focusing on the banquet market. Over the past 23 years, the wine series has performed well in the banquet scene.
Strong compliance, timely disclosure of information, and connection with international ESG. According to the plan, the company will comply with laws and regulations, disclose company information on time, and promote the integration of social responsibility reports with international ESG. This helps overseas investors obtain information and attract more overseas investors.
Strong returns and increased dividend rates. Since its listing, the company has paid 21 cash dividends, totaling 76.1 billion yuan, and over the past three years, the dividends have all exceeded 10 billion yuan. The company will continue to increase its dividend rate in the future, increasing investors' returns while also reflecting the company's current good operating level and confidence in future development.
With strong confidence, the Group increased its holdings of the company's shares. On December 14, 2023, the company announced a plan to increase its holdings of the company's shares, with an increase of not less than 400 million yuan and no more than 800 million yuan. Up to now, it has increased its holdings by 140,209,344 yuan. It fully reflects Wuliangye Group's confidence in the company's future stable development and recognition of long-term development value, which is conducive to boosting investors' confidence in the company and promoting the company's stable and long-term development.
Strong communication and optimization of relationships with investors. The company will enhance the degree of openness of company information by participating in brokerage strategy meetings and receiving investors for field research. In addition, the company will also strengthen effective communication with investors and potential investors through online communication, offline reverse road shows, telephone exchanges, and interactive easy platform questions and answers, etc., to enhance investors' understanding and approval of the company's situation, and further enhance corporate value.
According to our grassroots research feedback in many places at the end of January, the dealer's payment progress was about 40%-60%, and the inventory was in about 80 days. According to feedback from dealers in many places after the holiday, the payment process increased to 60%-80% (the maximum payment limit the manufacturer can accept), and the inventory ranged from 30-60 days. Sales during the Spring Festival still performed well under a 23-year high base. Sales increased 20% year over year during the Spring Festival in '23, while during the Spring Festival in '24, dealers reported that Pu 5 sales still had medium to high single-digit growth compared to '23, and wholesale prices also rose steadily in anticipation of price increases.
Investment advice: In the future, as industry concentration continues to increase, the company can rely on its excellent brand power to combine price increases and effective price control policies, which is expected to bring about a steady increase in performance. We expect the company's revenue to grow 15.10%/14.15%/12.92% to 85136/97179/109737 million yuan respectively in 23-25, and net profit to mother will increase 15.92%/15.31%/14.41% to 30940/35619/40752 million yuan respectively, corresponding to the current PE 17.34/15.07/13.17x. The current valuation is marginal and maintains a highly recommended rating.
Risk warning: macroeconomic risks falling short of expectations; increased industry competition; food safety risks, etc.