Growth is high, dividend rates still have potential to improve, and maintain a “buy” rating
Luzhou Laojiao's total revenue in 2023 was 30.23 billion yuan, +20.3% year-on-year, and net profit to mother was 13.25 billion yuan, +27.8% year-on-year. 2024Q1's total revenue was 9.19 billion yuan, +20.7% YoY, and net profit to mother was 4.57 billion yuan, +23.2% YoY. Performance was better than expected, and profitability continued to improve. We raised our 2024-2025 profit forecast and added a 2026 profit forecast. Net profit for 2024-2026 is 164.6 (+1.1), 200.2 (+4.4), and 23.96 billion yuan, respectively, +24.2%, +21.6%, +19.7% year-on-year, and EPS is 11.18 (+0.08), 13.60 (+0.30), and 16.28 yuan, respectively. The current stock price corresponds to PE 16.9, 13.9, and 13.9 yuan, respectively. 11.6 times The company's target revenue for 2024 is no less than 15% year-on-year growth, maintaining a dividend rate of 60% in 2023, and maintaining a “buy” rating.
The growth of high-end wine was mainly contributed by price. The sales volume of high-end wine in mid-2023 was 26.841 billion yuan, +21% over the same period, of which volume was +1% and price +20%. The main reason was that the settlement price of Gaoguo Cellar increased significantly in 2023 and the waist product structure was upgraded. Revenue from other alcoholic beverages was 32.36 billion yuan, +23% year-on-year, with volume +20% and price +3%, benefiting from an increase in tonnage. The gross margins of medium and high-end liquors and other wines were 92.27% (+1.22pct) and 56.48% (+3.31pct), respectively.
Good cash flow and high report quality
The contract debt balance at the end of 2024Q1 was 2.53 billion yuan, +81 billion yuan year on year. After considering the month-on-month variable, Q1 revenue +34%; 2024Q1 sales revenue was 10.64 billion yuan, +32.3% year-on-year, higher than the actual revenue growth rate.
The gross margin increased, and the gross margin for the period was stable. Profitability increased significantly in 2023 gross margin +1.7 pct to 88.3% year over year, and the sales expenses/ management expenses ratio was -0.6 pct/ -0.9 pct year over year, respectively. The detailed structure of sales expenses changed significantly. Advertising expenses were reduced in sales expenses details, promotional expenses increased rapidly, and the net profit margin to mother was +2.6 pct to 43.8% year on year. 2024Q1 gross margin was +0.28pct year on year, and the increase was slower than in 2023. Sales expenses/management expenses ratios were -1.2pct/-0.8pct, respectively, driving net profit to mother +1.0pct to 49.8% year over year. Mid-range liquors are expected to grow faster in 2024, and the increase in gross margin is slower than in 2023, but benefiting from the decline in expense ratios under scale-up, net interest rates are still rising.
Risk warning: Macroeconomic fluctuations have led to a decline in demand, and expansion outside the province falls short of expectations, etc.