1Q24's revenue slightly exceeded our expectations, and profit was slightly lower than our expectation that 1Q24 achieved total operating income of 46.485 billion yuan, +18.04% year over year; realized 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. Revenue slightly exceeded our expectations, mainly due to the increase in Maotai liquor sales in the first quarter exceeding our expectations, profit slightly lower than our expectations, and mainly due to the increase in tax rates.
Development trends
Revenue growth has been steady and steady, and profits have been slow, mainly due to increased tax payments. 1Q24 Maotai's revenue was 39.7 billion yuan/+18% year over year. We expect the Feitian Moutai distribution channel to contribute to price increases, and the sales volume of Maotai liquor will increase by a high single digit, and others will contribute to structural improvement; the volume increase is mainly due to non-standard Maotai contributions. In addition, the distribution of Chinese zodiac and fine products increased a lot in the first quarter. Furthermore, the implementation of the Flying Moutai quota was faster than in the same period last year. The revenue for the series wine series was 5.9 billion yuan/+18% year-on-year, mainly due to Maotai's control of goods in March 1935 to maintain stable batch prices. The 1Q24 gross profit margin was basically stable at 92.7%, and the tax and surcharge rate was +1.6ppt to 15.7% year-on-year, which is the main reason why the profit growth rate was lower than revenue. We think it was mainly due to Maotai liquor production being faster than sales in the first quarter. It is expected that the tax rate will remain relatively stable throughout the year.
The distribution channel volume in the first quarter was rapid, the cash flow performance was good, and the reporting was high quality. By sales model, 1Q24's direct sales channel revenue was 19.3 billion yuan/year over year, of which “i Maotai” achieved revenue of 5.343 billion yuan/year over year. After rapid growth in the past few years, with the normalization of “i Maotai” platform investment, the direct sales channel growth rate stabilized; the wholesale agency channel revenue was 26.3 billion yuan/year over year +25.8%, mainly due to 1Q24's high increase in non-standard Maotai investment in dealer channels and the rapid pace of flying quota. 1Q24 sales revenue was 46.26 billion yuan/YoY +29.3%, year-end contract debt was 9.52 billion yuan/YoY +14.3%, and the reporting growth quality was high.
Currently, the price of the Flying Sky Market is stable, and the company's short-term and long-term growth certainty is still strong. We believe that the company is still using the increase in non-standard share and the increase in direct sales share as the main growth engine this year. The company has launched a series of cultural products from Scattering Flowers, Feitian, Spring, Summer, Autumn, and Winter, contributing to revenue growth; the “i Maotai” launch has entered a steady growth stage, and it is expected that the company's online non-standard products will control scarcity and will not greatly disrupt the overall supply structure of Maotai liquor; in the long run, the space for Feitian price increases and Maotai production expansion can still support steady and sustainable growth.
Profit forecasting and valuation
We kept the company's profit forecast for 2024/25 unchanged, maintaining a target price of 2,486 yuan, corresponding to 35/30 times P/E in 2024/25, and the current price corresponding to 24/21 times P/E in 2024/25, with 45% room to rise, maintaining the industry rating.
risks
The macroeconomic recovery was slower than expected, and the recovery in demand for liquor fell short of expectations.