Core Conclusions
Incident: The company released the 2023 annual report and 2024 quarterly report data. In 2023, it achieved revenue/net profit of RMB 319.3/10.44 billion yuan, an increase of 21.8%/28.9%, respectively. Among them, 23Q4 revenue/net profit increased 27.4%/2.0% respectively. 24Q1 achieved revenue/net profit to mother of 153.4/6.26 billion yuan, an increase of 20.9%/30.0%, respectively. Combined with 23Q4 and 24Q1 analysis, 24Q1 profit still slightly exceeded market expectations.
Revenue for 23 was in line with expectations, and sales rate optimization unleashed profit elasticity. High-priced alcoholic beverages achieved revenue of 23.20 billion yuan in mid-year, an increase of 22.6%. Among them, Qing20 and Qing25 maintained rapid growth, driving the overall sales share of the blue and white series to 46%, while other alcoholic beverages achieved revenue of 8.54 billion yuan, an increase of 20.2%, increasing investment in BOFEN in response to fluctuations in external demand. The company's nationalization strategy is progressing steadily, and the 1 billion level market continues to increase. The core market south of the Yangtze River increased by more than 30%, revenue within and outside the province increased by 20.4%/22.8%, respectively. The volume of individual merchants inside and outside the province increased by about 13%, and the quality of growth is quite solid. On the profit side, gross margin was slightly under pressure, and the cost ratio was greatly optimized during the period. The double-digit decline in advertising and business promotion expenses drove the sales expense ratio to -2.9 pct year over year, the management expense ratio to -0.9 pct year over year, and the net interest rate to mother increased by 1.8 pct to 32.7%, and profitability continued to increase.
24Q1 revenue was in line with expectations, and profit slightly exceeded expectations. Shipments of various products in the first quarter of this year progressed according to the planned schedule (ahead of the same period last year), so medium- and high-priced wine/other alcoholic beverages increased by 24.9%/9.9%, respectively, in line with expectations. By region, both inside and outside the province increased by 11.4%/27.6%, respectively, and the acceleration outside the province clearly contributed to the main increase. On the profit side, the improvement in the product structure boosted gross margin by 1.9 pct, and the sales expense rate/operating tax rate decreased by 0.5 pct/1.1 pct, respectively, due to the pace of fee payment/tax payment, and the net interest rate to mother increased by 2.8 pct, slightly exceeding market expectations. 24Q1 sales revenue was 14.2 billion yuan, an increase of 44.7%. Mainly due to accelerated repayment in March, the contract debt at the end of Q1 was 5.59 billion yuan, +1.42 billion yuan over the same period last year. It is in a historically high position, and the reports have sufficient reserves and excellent quality.
The company continues to operate with high quality potential, and there is strong certainty about the annual results. Currently, the performance of many indicators is excellent, and the channel potential is still strong. The company firmly implements the Fen Rewards model, strengthens management and guarantees channel profits to prolong the boom cycle, and further strengthens the certainty of high-quality starting performance in 24 years. In the medium to long term, with strong brand power and differentiated fragrance types, there is plenty of room for nationalization and high-end development. We expect EPS to be 10.7/13.2/16.0 yuan in 24-26, and the corresponding PE will be 22.9/18.7/15.4 times, respectively, to maintain the “buy” rating.
Risk warning: The recovery in consumption falls short of expectations, the expansion of nationalization falls short of expectations, and high-end growth falls short of expectations.