Matters:

Event: On June 4, 2024, the Fenjiu Sales Company Dealer Conference was held in Kunming, Yunnan with the theme of “Deeply Implementing the Fenjiu Revitalization Program and Comprehensively Promoting High-Quality Market Development”.

Guoxin Food and Drink Views: 1) The new version of Old Baifen has been fully upgraded, and the Blue and White 20 has introduced a five-code system. 2) Digital transformation continues to advance, cultural reshaping, organizational reshaping, competitiveness reshaping or core. 3) Investment advice: Shanxi Fenjiu has entered a stage of high potential energy development, maintaining the previous profit forecast. We expect the company to achieve revenue of 384.7/451.7/51.93 billion yuan in 2024-2026, up 20.5%/17.4%/15.0% year on year; net profit to mother is expected to be 131.2/160.6/18.96 billion yuan, up 25.7%/22.4%/18.0% year on year; corresponding to PE 22.7/18.5/15.7X. Considering the company's continued operating potential, revival cultivation progressed in an orderly manner, maintaining the “superior to the market” rating.

Commentary:

The new version of Laobai Fen has been fully upgraded. At the Qinghua 20 and Shanxi Fenjiu Kunming Dealer Conference, the Qinghua 20 and Laobai Fenjiu 10 were newly upgraded and launched. The invoicing price for the full range of Laobai Fenjiu increased by 5 yuan per bottle, and the five-code related system was fully introduced. The newly upgraded Blue and White 20 fully integrates the “five codes in one” system and embeds an RFID chip (supports NFC reading function) in the bottle cap to strengthen the company's management of channels and price systems. The Lao Baifen series was upgraded for the first time in nearly 5 years. The increase in invoicing prices was mainly due to the introduction of the five-code system, and channel profits were reshaped later or through BC linkage. We anticipate that the Lao Baifen series may be the core of the waist in the 30 billion dollar era after the company sprint to revenue in 2024-2025.

Digital transformation continues to advance. Cultural reshaping, organizational restructuring, competitiveness reshaping, or core 2024 is a year where the Fenjiu channel continues to make up for shortcomings. Based on the five-code correlation system based on code scanning rates, it is mainly aimed at solving market order problems such as channel trading and random prices. It is also the proper meaning of Fenjiu's revenue entering the next 30 billion dollar era. With the trial operation of the blue and white 20 five-code system in the Shaanxi market, we expect that the company may fully upgrade the new code scanning system in 2024Q3 to achieve “control panel profit” for manufacturers. In the future, after channel shortcomings are continuously filled, the company is expected to actively improve marketing quality around the three levels of “cultural reshaping, organizational reshaping, and competitiveness reshaping”, in dimensions such as top-level design and product segmentation of the Blue and White 30 Revival Edition or new initiatives.

Investment advice: Fenjiu, Shanxi has entered a high-potential development stage, maintaining the “superior to the market” rating and maintaining the previous profit forecast. We expect the company to achieve revenue of 384.7/451.7/51.93 billion yuan in 2024-2026, an increase of 20.5%/17.4%/15.0%; it is expected to achieve net profit of 131.2/160.6/18.96 billion yuan, up 25.7%/22.4%/18.0% year on year; corresponding to PE 22.7/18.5/15.7X. Considering the company's continued operating potential, revival cultivation progressed in an orderly manner, maintaining the “superior to the market” rating.

Risk warning

Increased competition; demand recovery falls short of expectations; policy risks, etc.