Recently, we attended the 2023 Shareholders' Meeting of Huazhi Liquor Store. The company reviewed the business situation in 2023 and exchanged answers on core issues such as key tasks, development strategies, and channel layout in 2023. The core feedback is as follows:
In 2023, we withstood the pressure and bucked the trend. The supply of famous products and sales of fine wine continued to deepen, and internal control work was strengthened to improve operational efficiency. In 2023, in the face of a slow recovery in overall demand in the liquor industry and pressure on the price system for famous products, the company continued to deepen its channel construction and product matrix sales, focusing on four major aspects:
1) Wine store development, adding 201 Huazhi 3.0 flagship stores, and developing high-end stores; 2) Jinrui Tianhe Marketing, pioneering the lotus core single product marketing model to support the growth of fine wine; 3) The supply chain matrix is rich, and cooperation between Hutoufen, Baiyunbian, and Benfulafite deepens to lay the foundation for the fine wine matrix; 4) Strengthen internal control work, increase revenue and expenditure, and emphasize cost reduction and efficiency.
Looking ahead to 2024, the upgrading of high-end wine stores will continue to advance, and the focus of fine wine on lotus sales will drive profit growth. The company continues to deepen its channel & product matrix advantages. On the channel side, Huazhi Liquor Store continues to upgrade to the 3.0 version of Huazhi Liquor Store, seeking higher threshold and high-quality partners to operate stores. It is expected to achieve a breakthrough in the number of major stores around 3,000 in the next 3-5 years, and the speed of channel store expansion will remain stable. At the same time, the company is focusing on the development of fine wine sales. Among them, the sales model of Jinrui Tianhe, the core single product of its own brand, has been initially explored and completed. BC's integrated development has achieved mass marketing. This year, it will continue to conquer Hehua's “Ten Thousand Tantanhu” and customized services, and the C-side transformation is gradually deepening.
We believe that the slight pressure on the price system and demand for famous products is an opportunity for leading distribution companies to deepen barriers, and the company hopes to further enjoy the dividends of leading companies in the industry. The current industry environment is facing weak recovery pressure. As a leading distribution company with strong financial strength and a stronger channel system, the company hopes to continue to enjoy the dividends of industry concentration, deepen product cooperation with famous domestic and foreign wineries such as Wuliangye, Maotai, Gujing, Fenjiu, Gujiao, Benfu, Lafite, etc., while strengthening the organizational foundation, strengthening internal control mechanisms, and highlighting the resilience of the sales model. The 24Q1 company's fine wine sales performance was excellent, achieving a year-on-year increase of 28.24% in net profit of 130 million yuan. With the restoration of the price system for main products in the industry and driven by sales of its own brands such as Lotus, profit side flexibility is expected to gradually be unleashed.
Profit prediction and investment advice: We believe that with the restoration of the industry's price system, the company's profit side is highly flexible, and it is expected that with the help of the omni-channel marketing network system, a new 10 billion journey will set sail. We expect the company to achieve operating income of 112.04/12.312 billion yuan in 2024-2025, an increase of 10.7%/9.9%; we expect to achieve net profit to mother of 2.83/343 million yuan in 2024-2025, an increase of 20.3%/21.3% year on year, maintaining the “recommended” rating.
Risk warning: Store expansion falls short of expectations, industry price system repair falls short of expectations, consumer spending power falls short of expectations, etc.