Description of the event

The company's total revenue for 2024Q1 was 4.293 billion yuan (+7.16%); net profit to mother was 452 million yuan (+16.78%), after deducting non-net profit of 446 million yuan (+16.91%).

Incident comments

Volume and price increases steadily, and there are still breakthroughs in the company's product structure. Looking at volume and price breakdown, (1) volume: 24Q1 sales volume was 866,800 tons, up 5.25% year on year. Sales performance was better than the industry's main reason for lower base pressure. (2) Price: In 24Q1, the tonnage price increased 1.3% year on year, and the revenue in the premium, mainstream, and economic price bands increased 8.3%/3.6%/12.4% year on year, respectively. The better growth rate of economic products was mainly due to the upgrading of the internal structure of the price band, the increase in tonnage price, and sales volume +1.69% year over year.

The purchase price of raw materials has declined, and the improvement in tonnage costs has exceeded expectations. The cost per ton of the 2024Q1 company decreased by about 3.27% year on year, mainly due to the high cost pressure of 2023Q1 tons (2023Q1 increased 5.65% compared to 2023Q1). At the same time, the purchase price of barley, packaging materials, etc. improved. Combined with the increase in sales volume in 2024Q1, the capacity utilization rate is expected to increase. As depreciation and amortization of the Foshan plant is put into operation in Q2, the improvement in ton costs is expected to narrow, and the pressure on ton costs will remain manageable throughout the year. The gross margin of the 2024q1 company increased 2.74 pct year on year to 47.9%, and the cost ratio for the period increased 0.42 pct year on year to 16.18%. Among them, the sales/management expenses ratio was +0.18/+0.02 pct year on year, and the net profit margin increased 0.87 pct to 10.53% year on year. There was still a breakthrough in profitability.

In line with the growing trend of mid-range alcohol, the company's channel cost investment strategy was actively adjusted to suit the market. The two single products, Leborg and Chongqing, are growing well in line with the cost-performance trend. In 2024, the company actively adjusted its sales expense investment strategy, strengthened channel resource preferences, and deepened the development of large cities. The company's current operations have bottomed out and improved, profits are expected to continue to rise, and the high dividend policy may continue. We expect the company's 2024/2025/2026 EPS to be 3.01/3.29/3.53 yuan, and the corresponding PE will be 25X/22X/21X, maintaining a “buy” rating.

Risk warning

1. The risk of slow recovery in demand;

2. Industry competition further exacerbates risks;

3. Risk of changes in consumer consumption habits, etc.;