The business performance was resilient, and the dividend rate increased, maintaining the “buy” rating with revenue of 83.27 billion yuan in 2023, +12.6% year-on-year, and net profit of 30.21 billion yuan, or +13.2% year-on-year. 2024Q1 revenue was 34.83 billion yuan, +11.9% YoY, and net profit was 14.05 billion yuan, +12.0% YoY. Revenue profit is in line with expectations. Considering the effects of price increases on main products in 2024, we raised our 2024-2025 profit forecast and added a profit forecast for 2026. The net profit for 2024-2026 is 344.6 (+8.1), 393.1 (+12.3) billion yuan, and 44.18 billion yuan, respectively, +14.1%, and +12.4% year-on-year, and EPS is 8.88 (+0.21), 10.13 (+0.32), and 11.38 yuan, respectively. The current stock price corresponds to PE 17.2, 15.1, 13.4 times, the company's dividend rate in 2023 is 60%, up from 55% in 2022. The dividend rate corresponding to the current stock price is 3%. Total operating income is expected to maintain steady double-digit growth in 2024, maintaining a “buy” rating.
The volume increased significantly, and the tonnage price decreased
In 2023, Wuliangye's product revenue was 62.80 billion yuan, +13.5% year-on-year; other liquors achieved revenue of 13.64 billion yuan, +11.6% year-on-year. In terms of volume and price breakdown, Wuliangye's sales volume in 2023 was 38,700 tons, +18.0% year over year, and the tonnage price was 1.624,600 yuan/ton, down 3.8% year on year. The main reason is that 1618 and low-grade products are expected to grow at a higher rate. The sales volume and tonnage price of wine series were 120,400 tons and 113,300 yuan/ton, respectively, compared with +27.6%/-12.6%. Sales of series wine increased dramatically, and the company increased its market investment and dealer layout for mass-priced products.
Different regions are highly differentiated, and dominant regions drive the market
In 2023, the eastern region's revenue was 22.39 billion yuan, +17.9%; the western region's revenue was 26.22 billion yuan, +21.7% year over year; and the central region was 12.96 billion yuan, +16.3% year over year. The southern region was 6.81 billion yuan, -9.0% year on year; the revenue of the northern region was 8.07 billion yuan, -4.0% year on year.
Profitability remains stable under cost reduction and efficiency
Contract debt at the end of 2024Q1 was 5.05 billion yuan, compared to the end of 2023Q4 - 1.82 billion yuan. 2024Q1 sales revenue was $21.77 billion, or -24.0% year-on-year, mainly due to the combined impact of the company taking more measures to support dealer development in line with market changes, receiving more bank acceptance notes, and lower maturing cash amounts for bank acceptance notes.
In 2023, gross margin was +0.37pct to 75.79% year on year. Mainly, the company strengthened cost management, improved production efficiency, and the net margin was +0.04pct to 37.85% year over year. 2024Q1 gross margin +0.04pct yoy to 78.43%, net margin -0.07pct yoy to 42.02%. The company began leading eight generations of price increases in 2024. Subsequent tonnage prices are expected to improve, and net interest rates will maintain a steady upward trend.
Risk warning: Macroeconomic fluctuations have led to a decline in demand, and expansion outside the province falls short of expectations, etc.