Key points of investment

Event: In 2023, we achieved revenue of 3.244 billion yuan, +25.85% year over year; net profit to mother was 809 million yuan, +55.28% year over year. 23Q4 achieved operating income of 807 million yuan, -14.90% YoY; net profit to mother was 144 million yuan, or -33.37% YoY. 24Q1 achieved operating income of 802 million yuan, +5.51% year-on-year, and net profit of 169 million yuan to mother, -9.80% year-on-year.

The performance of the 23 annual report was in line with expectations, and the 358 percent revenue share took shape. ① By product, pre-mixed wine achieved annual revenue of 2.9 billion yuan, +28% over the same period. Of these, we expect strong wine to account for about 40-50%, and slightly intoxicant+refreshing to account for 40% + of revenue. ② By channel, revenue from offline/digital retail/ready-to-drink channels was +42%/-29%/-0.9% year-on-year. The rapid increase in offline growth was mainly due to the release of strong potential energy to drive sales at outlets. Relative pressure on online was mainly to maintain prices, reducing cooperation among some e-commerce platforms. The ready-to-drink channel is still in its infancy. ③ On the profit side, the product structure drove a gross profit margin of 66.7% /+2.9pct, and sales expenses were +13%. Of these, publicity activities were only +12%. 1, the company continued to accurately invest expenses in recent years, and 2 strong potential energy led to a reduction in corresponding cultivation costs. Therefore, the sales expense ratio was 21.7% /-2.4pct, driving the net interest rate back to 24.7% /+4.7pct.

24 Q1 revenue was in line with expectations, and the decline in profit growth was due to an increase in expense investment. ① Pre-blended wine revenue was 710 million yuan, +5.6% over the same period. We expect strong wine to account for about 50% of revenue and 40% + of light drinking revenue; around the Spring Festival, the company focused on marketing promotion through various methods such as new enhanced cool spokespersons, Yinglong gold bars, and the launch of joint brands. Sales during the Spring Festival were good, and channel inventory was in a healthy range.

② On the profit side, the company's gross profit margin was 68%, +2.87pct year on year. The main product structure improved (Strong 23Q1 revenue accounted for about 45%), and the 23H2 price increase effect is also expected to gradually show; the sales expense ratio is 29%, +8.8 pct year on year. The main company continues to help the channel drive sales and inventory removal during the peak season.

The pre-mixed wine is steady, and the spirits business is worth looking forward to. Looking ahead to the whole year, in terms of the pre-blending business, we will continue to build a 358-degree product matrix, maintain strong potential energy, and achieve strategic volume. Pre-blending revenue is expected to maintain a steady increase under a high base. Furthermore, quarterly cost fluctuations will not change the annual sales budget, and the sales rate of the pre-blending business is expected to return to normal launch levels throughout the year. In terms of the spirits business, Q4 As the company progresses normally, this business is also worth looking forward to.

Profit forecasting and investment rating: Considering the company's current stage of development and subsequent progress in the spirits business, both revenue and profit performance have improved. Adjusted 24-25 revenue of 400/52 billion yuan (previous value: 46/5.9 billion yuan), net profit to mother of 93/13 billion yuan (previous value of 1.3/17 billion yuan), and added 26-year revenue of 6.6 billion yuan, and net profit to mother of 1.6 billion yuan. The current corresponding PE for 24-26 is 22/16/13X. It is recommended to actively follow the progress of the subsequent spirits business, consider steady pre-blending performance, large whiskey business space and low market share, and maintain a “buy” rating.

Risk warning: increased competition in the pre-mixing business, falling short of expectations in the spirits business, food safety issues