Incident: The company released its 2024 quarterly report. In 24Q1, it achieved total revenue of 46.485 billion yuan, +18.04% year over year; achieved operating income of 45.776 billion yuan, +18.11% year over year; realized net profit of 24.065 billion yuan, +15.73% year over year. Cash received from sales of goods and provision of services amounted to 46.357 billion yuan, +29.34% over the same period last year.

The product matrix effect is evident, and the channel layout is dynamically balanced. 24Q1's alcohol business revenue was 45.643 billion yuan, +17.83% year over year; by product, 24Q1 Maotai achieved revenue of 39.707 billion yuan, +17.75% year over year; serial wine achieved revenue of 5.936 billion yuan, +18.39% year over year. At the market level, in 2024, Maotai launched products such as “Longmao,” “Flying Flowers,” and “Xunfeng Liquor,” and carried out a series of product promotion activities to further boost the tonnage level of non-standard products. As a high-end wine in the wine series, Maotai 1935 is priced at 1,000 yuan. It continues to carry out cultural activities such as “Find China” to enhance its market influence, and other wine series continue to gain strength in terminals. By sales model, the 24Q1 direct sales channel achieved revenue of 19.319 billion yuan, with direct sales channel revenue accounting for 3.64 percentage points to 42.33% year on year, of which “i Maotai” achieved non-tax revenue of 5.34 billion yuan, 8.96% year on year; wholesale agency channel achieved revenue of 26.324 billion yuan, +25.78% year on year, and domestic distributors increased by 17 to 2,097. The increase was all serial wine dealers. By region, in 24Q1, domestic revenue was 44.830 billion yuan, +17.73% year-on-year; foreign revenue was 813 million yuan, +23.56% year-on-year.

Operating cash flow performance is excellent, and the increase in tax expenses affects net interest rates. 24Q1 gross margin was 92.61%, +0.02pct year on year; net margin was 51.77%, -1.04pct year on year, mainly due to the increase in tax and surcharges ratio by 1.62 pct year on year. The 24Q1 company's sales expense ratio/management expense ratio (including R&D) changed by +0.53/-0.67 percentage points to 2.45%/4.50% year over year; as of 24Q1, contract liabilities were 9.523 billion yuan, +14.33% year over year; 24Q1 increased 6.792 billion yuan month-on-month over 23Q4. 24Q1 net cash flow from the company's operating activities was $9.187 billion, +75.17% year over year, mainly due to an increase in cash received from the company's sales products and a net increase in the amount of funds stored in the central bank and interbank cash outflow from operating activities.

Investment suggestions: The company's operating goals for 24 years: 1. Total revenue increased by about 15% year on year; 2. Complete fixed asset investment of 6.179 billion yuan. As Maotai's production capacity gradually expands and the Maotai liquor series is driven by two wheels, marketing reform dividends will continue to be released, and the Group's “14th Five-Year Plan” double doubling (revenue doubling from 100 billion yuan to 200 billion yuan; profits and taxes doubling to 180 billion yuan) are strong in fulfilling expectations. We expect the company's net profit to be 877/1028/118 billion yuan respectively in 2024-2026, up 17.4%/17.2%/14.7% year-on-year. The current stock price corresponds to PE 24/21/18 times, respectively, to maintain the “recommended” rating. Risk warning: channel reforms, product structure upgrades falling short of expectations, food safety risks, etc.