The average price of medium and high-end barley wine continues to rise, and steady price increases drive revenue growth. The average sales price of medium and high-end barley wine has increased since 2020. As of the first half of 2023, it has reached 62.9 yuan/500 ml, or +1.2% over the same period. It is expected to continue to rise slowly, driving up the share of product revenue in the 60 yuan/500 ml retail price range. In 2023, revenue from products over 100 yuan was 580 million yuan, +46.0% year-on-year. The company actively lays out a price band of 200 yuan or more, and increases sales of products with a price tag of 200 yuan or more through the promotion of famous wine into famous enterprises.

Sales in Qinghai Province stabilized, and sales outside the province continued to expand. During the epidemic, the company's sales in Qinghai Province fell sharply, and sales in the province fell 43.8% in 2020. Sales in the Qinghai market recovered relatively quickly in 2023. Among them, the Xining market showed the most prominent recovery momentum, especially the banquet channel. In 2023, the province's sales volume was 81 million yuan, +27.3% year-on-year. The Tibet market outside the province may become a highlight of growth, while continuing to benefit from increased sales of export-oriented products. In 2023, sales of the foreign market were 370 million yuan, +20.6% over the same period last year.

The increase in tourism demand in Qinghai will drive sales of Xiaohei products. During the 2024 Spring Festival holiday, Qinghai Province received a total of 2.176 million visitors, +40.2% year-on-year, and total tourism revenue of 2.93 billion yuan, or +49.9% year-on-year.

Tianyoude Xiaohei Barley Liquor is a specialty of Qinghai and is very popular among tourists. It is expected that the “hot” Qinghai tourism market will drive sales of Xiaohei Barley Liquor.

Investment advice: In 2024-2026, we expect the company to achieve operating income of 1,48/17.7/2.08 billion yuan, +22.4%/+19.5%/+17.7% year-on-year; net profit to mother of 1.5/2.1/30 billion yuan, +67.4%, +40.3% year-on-year. The domestic market in Qinghai Province is steadily compounded by expansion outside the province, and the revenue of products above 100 yuan/500ml grew rapidly. It was covered for the first time, giving it an “increase in weight” rating.

Risk warning: Qinghai's economic development is not as good as expected, leading to slow consumption upgrades within the province; development outside the province falls short of expectations; competition from foreign alcohol; and profits fall short of expectations due to increased sales expenses.