The operating goals were successfully achieved in 2023, and the cost side continued to be lean. In 2023, medium and high-end wines achieved revenue of 26.841 billion yuan, or +21.3% (volume +1.2%, price +19.8%), and the revenue of the Guojiao series is expected to break 20 billion; mid-range wines may still be in the adjustment stage. The cellar age series actually increased slightly, and the 60th edition of special songs grew by 25-30%, with time-honored specialty songs focusing on inventory removal. In 2023, other alcoholic beverages achieved revenue of 3.236 billion yuan, or +22.9% (volume +19.6%, price +2.7%). Mass consumption recovered significantly, and headquarter etc. are expected to grow rapidly. Looking at gross margin, the overall gross margin in 2023 is +1.7 pcts. It is expected that the company will raise the settlement price of Guojiao Franchise Company, compounding the recovery in price segments. On the cost side, the sales expense ratio in 2023 is -0.6 pct year on year. It is expected that the scale effect will be prominent, the cost efficiency ratio will increase, etc.; the management cost ratio is -0.9 pct year over year, which is expected to be lean internal management. On the profit side, net interest rate in 2023 was +2.5pcts year-on-year, which is expected to contribute to structural upgrades and continuous cost optimization.
2024Q1 revenue continues to grow at a high rate, and product restructuring capabilities are highlighted. The recovery in demand in 2024 is more divided, further testing the ability and speed of product restructuring of wine companies. It is expected that the 2024Q1 Gucellar series will grow at a rate of 15-20%, the waist series will recover significantly, the time-honored specialty may re-enter the growth channel in 2024, and the 60 edition of the specialty will continue to maintain a rapid growth rate of 30% +. In terms of gross margin, 2024Q1 gross margin was +0.1 pct. It is expected mainly due to the recovery in demand and the recovery of the public. The cost side continues to be in the optimization channel. The 2024Q1 sales cost rate/management cost ratio is -1.2pct/-0.8pct year-on-year, benefiting from digital promotion and internal exploration.
On the profit side, the net interest rate of 2024Q1 was +0.9 pct year on year. It is expected that profit elasticity in 2024 may come from cost-side optimization.
Digital transformation continues to protect growth, and business quality may be a higher priority. Through the report, we found three major changes in Luzhou Laojiao: 1) The speed of product restructuring is remarkable. The advantages of full price layout and early completion of adjustments are highlighted. The company has a strong ability to capture and adapt to changes in demand; 2) The speed of regional adjustment is remarkable. In 2023, Laojiao took the lead in returning to the base market, focusing on cost efficiency improvement and terminal exploration; 3) The digital transformation capabilities are remarkable. Digitalization highlights price and volume plate control, as well as scenario optimization and price list control.
Risk warning: demand recovery falls short of expectations; competition intensifies; investment suggestions such as policy risk: revise previous profit forecasts and introduce 2026, and the company is expected to achieve operating income of 362.8/429.9/50,09 billion yuan in 2024-2026 (previous value was 362.39/42.04 billion yuan, adjustment range +0.1%/+2.3%), up 20.0%/18.5%/16.5% year over year; achieving net profit to mother of 160.9/193.5/22.84 billion yuan (previous value was 158.4 billion) 18.72 billion yuan, adjustment range +1.6%/+3.4%), +21.5%/20.3%/18.0% year-on-year; corresponding PE was 17.1/14.2/12.0X, respectively, maintaining the “buy” rating.