Incident: On April 29, Wuliangye released the “2023 Annual Report” and “2024 First Quarter Report”. In 2023, the company achieved operating income of 83.272 billion yuan, up 12.6% year on year; realized net profit of 30.211 billion yuan, up 13.2% year on year; basic EPS 7.783 yuan/share, up 13.2% year on year; 2024Q1, the company achieved operating income of 34.833 billion yuan, up 11.9% year on year; achieved net profit of 14.039 billion yuan, year on year increase 12.7%; basic EPS was 3.618 yuan/share, up 12.0% year on year.
Double-digit growth has been achieved for 8 consecutive years, and maintaining this growth rate is expected to successfully achieve the 145-year target of breaking 100 billion dollars for the sake industry. In 2023, the company sold 62.804 billion yuan of Wuliangye products, up 13.5% year on year, with a gross profit margin of 86.6% (+0.08 pct), sales volume/ton price +18.0%/-3.8% year on year; sales volume and tonnage ratio of 13.643 billion yuan, up 11.6% year on year, gross profit margin 60.2% (-0.51 pct), sales/ton price respectively +27.6%/-12.6%. Among alcoholic products, distribution/direct sales models were different. It achieved revenue of 459.85/30.462 billion yuan, and direct sales accounted for 39.85%, a year-on-year decrease of 0.22 pct. The company's annual gross margin increased by 0.37 pct to 75.79%; the overall expense ratio remained stable, with sales/management expense ratios of 9.36%/3.99% (+0.11/-0.16pct), respectively, and the company's annual net interest rate increased 0.04 pct to 37.85%. Looking at the subregions, the company expanded its advantages in dominant regions throughout the year. The east/west/central market, which accounts for a relatively high share, all achieved double-digit growth, while the southern and northern regions declined by single digits.
Q1 once again verified the resilience of sales, and volume reduction and price increases led to a return to healthy prices. At the beginning of the year, the company raised the factory price for eight generations, and resolutely implemented volume reduction through traditional channels. The volume conflict was resolved, and the price increase is expected to be smoothly transmitted. Currently, the price increase is gradually being repaired. 24Q1's revenue growth was close to 12%, laying the foundation for achieving double-digit growth throughout the year. Combined with the pace of payments, the price increase dividend is expected to continue until next year. Affected by the slow recovery in macroeconomic demand and low inventory prices, the company still needs to adhere to market management and long-term principles in anticipation of subsequent batch prices reaching the 970 yuan mark. According to the introduction of alcohol, the new 45° and 68° Wuliangye products will be officially launched in May, which is in line with the company's idea of investing in optimized planned quantities for products such as Wuliangye and cultural wine with special specifications at the 1218 conference. The success of the company's Lunar Year of the Dragon wine launched during the Spring Festival this year proved once again that when handling the relationship between supply and demand, the company still has enough brand power and product power to break through the higher price band market.
Annual performance pressure is manageable, leaving room for management. Based on the 10% performance target, the 2024 revenue target is 91.6 billion yuan, which can be achieved by achieving an overall growth of 8.9% for the remaining 3 quarters. Q1 At the same time, it achieved relatively rapid growth and price recovery, leaving room for subsequent management continuation and adjustment.
Investment advice: The resilience of the company's core single products has been repeatedly verified. Under the implementation of the policy of price increase and reduction, the conflict between supply and demand is being resolved and high-quality growth is being returned. As a strong fragrance leader, with proper coordination between supply and demand, the company still has the ability to successfully launch new products to share the growth pressure of large single products and break through the higher price band market upward. Under the current growth rate, the company is expected to successfully complete the 14th Five-Year Plan.
We predict that the company's 2024-2026 EPS will be 8.83, 9.96, and 11.09 yuan/share. Corresponding to the current share price PE will be 17.0x, 15.1x, and 13.6x, respectively, maintaining a “buy” rating.
Risk warning: Consumption recovery falls short of expectations; price trends fall short of expectations; food safety issues; risk of market fluctuations; consumption tax policy may change.