Core performance: The company released its 2024 quarterly report. In 24Q1, it achieved operating income of 1.08 billion yuan, an increase of 20.4% over the previous year; net profit to mother was 220 million yuan, an increase of 21.6% over the previous year. Contract debt at the end of the 24Q1 quarter was $630 million, up 33.1% year over year. 2024Q1, the company's gross margin was 65.4% (yoy+0.4pct), and the impact of alcohol donations on gross margin decreased; sales expenses ratio was 18.0% (yoy+0.2pct), management expenses ratio was 7.9% (yoy+0.69pct); net profit margin was 20.55% (yoy+0.2pct).
The vintage series led the upgrading of the product structure, and the soft series had upward and steady growth potential. By grade, 2024Q1 achieved revenue of 190 million yuan (yoy +86.5%) for products above 300 yuan/500ML. The vintage series is beginning to take shape, and its reputation continues to grow. Combining customer development and the cultivation of core opinion leaders, the space is worth looking forward to. Jinhui 18 is growing rapidly in the province, and Jinhui 28 is building brand potential. The 100-300 yuan product achieved revenue of 550 million yuan (yoy +24.1%). The Soft H3 series was gradually released, the Soft H3 accepted the demand for liquor consumption upgrades within 100 yuan, and the Golden Emblem 5 Star strengthened the penetration of banquets. Products below 100 yuan achieved revenue of 324 million yuan (yoy -4.2%), and the company continues to promote high-end product structure upgrades. 24Q1 products over 300 yuan accounted for 17.9% of revenue, +6.3pct year on year; 100-300 yuan product revenue accounted for 51.7%, +1.5pct year on year, 30.4% of revenue below 100 yuan, -7.8pct year on year.
Gansu Province has a stable foundation and continuous penetration, and the outer ring of the province has gradually broken through the markets of Gansu, East China, and North China. By region, 2024Q1 achieved revenue of 848 million yuan (yoy +22.6%), accounting for 79.6% of revenue, +1.3 pct. Tourism and investment have recovered well in Gansu Province. Combined with the precise operation of the company's one county and one policy, the market share continues to increase, and Gansu Province has achieved a high growth rate. In 24Q1, revenue from outside the province was 218 million yuan (yoy +13.2%). Gansu focuses on key model markets such as Baoji, Shaanxi, and continues to build bases in the five northwest provinces by focusing on Ningxia with the Energy Series and Qinghai with the Soft Series as the main focus. East China cooperated with Fosun to break through the East China market and continue to cultivate markets such as Inner Mongolia in the north, focusing on the Jinhui Laojiao series of group purchases.
The company is deeply involved in the Gansu market, built bases in the five northwest provinces, continued to penetrate within the province, and actively broke through outside the province. The vintage series leads the upgrading of the product structure, and the soft series has steady volume. We maintain our forecast for 2024-2026 earnings per share of 0.89, 1.10, and 1.33 yuan, respectively. Combined with comparable companies, we believe that the current reasonable valuation level of the company is 28 times the price-earnings ratio of 24 years, and the corresponding target price is 24.92 yuan, maintaining the purchase rating.
Risk warning
There is a risk that consumption upgrades fall short of expectations, spending remains high, and performance falls short of target.