The company's 24Q1 revenue/profit ratio was -28.3%/-42.6%, mainly affected by centralized preparation in Q4 but slow inventory digestion, and consolidated 23Q4+24Q1 revenue was still growing. Looking ahead, although there are no obvious signs of industry recovery, the company's leading position is stable, focusing on mid-range and high-end products, and the core market. The wine business is recovering, and the upgrading of the winery structure is driving the price band upward. Brandy mainly promotes high-end Cocoa, and is expected to seize the share of industry expansion driven by product strength.

Inventory digestion affected revenue, and consolidated 23Q4+24Q1 revenue/profit +6.9%/-1.6% YoY. The company released its report for the first quarter of 2024. The 24Q1 realized revenue/net profit/net profit after deducting non-attributable net profit was 888/1.59/ 154 million, respectively, -28.3%/-42.6%/-42.3% year-on-year. Q4 Centralized stocking but lower than expected inventory digestion led to a significant decline in Q1 revenue. Consolidated 23Q4+24Q1 revenue/profit +6.9%/-1.6% YoY.

Sales revenue follows a decline in revenue and affects cash flow performance. The company's 24Q1 operating cash flow fell to -65 million from 334 million in the same period last year. Of this, sales revenue was -27.4% to 885 million (close to the decline in revenue), but purchases of goods, payments to employees, taxes, and other cash related to operating activities all showed a slight year-on-year increase, leading to a deterioration in the quality of cash flow. Contract debt was +19.3% YoY to $159 million (-$16 million), compared to -$32 million in the same period last year.

Fee investment was controlled, but the decline in revenue caused a rise in the rate during the period, which dragged down net interest rates. The company's 24Q1 gross margin was +0.43pcts to 59.2%, and the main tax rate/ sales expense ratio was +1.42/-0.25/+2.16pct to 6.1%/17.9%/8.0%, respectively. Under the influence of the external environment, marketing expenses were controlled. Sales expenses were -29.3% to 145 million, but the sharp decline in revenue led to an increase in the period rate, and the net profit margin was -4.86pcts to 19.6%.

Investment advice: Inventory digestion affects revenue, and focus on structural upgrades. Although there are no obvious signs of recovery in the wine industry, the company's leading position is stable and the focus is on mid-range and high-end products. Consolidated 23Q4+24Q1 revenue is still growing. Looking forward to the future, the company focuses on large single products and core markets. The wine business is recovering, and the upgrading of the winery structure is driving up the price band. Brandy mainly promotes high-end elegance, and is expected to seize the share of industry expansion driven by product strength. The company's EPS forecast for 24-26 was adjusted to 0.78, 0.85, and 0.91 yuan, and no rating will be given yet.

Risk warning: impact on consumption power, changes in tariff policy on imported alcohol, insufficient circle expansion as expected, etc.