Recently, we have been tracking the recent business situation of Fenjiu in Shanxi. The updated feedback is as follows:

Lao Baifen upgraded prices and strengthened waist products. At the recent Fenjiu Sales Company Dealer Conference, the Qinghua 20 and Laobai Fenjiu 10 were newly upgraded and launched. The invoicing price for the entire series of Laobai Fenjiu increased by 5 yuan per bottle, and a five-yard system was introduced. Lao Baifen is positioned in the 100-300 yuan price range, with the banquet market as the main scenario. The revenue growth rate of the Laobaifen series is expected to increase in the second quarter after the release of special price increase information. The company's product strategy changed from “catching two heads, with the middle” to “catching blue and flowers, strengthening the waist, and stabilizing the bofen” in 2022. It is expected that the revenue growth rate of the Laobaifen series may be higher than the overall company growth rate in the second quarter after the release of special price increase information.

The growth momentum of Blue and White 20 continues, and the revival edition continues to focus on product promotion. The Blue and White series continues to rise high. The upgraded Blue and White 20 introduces a five-code system to strengthen the control of channels and price systems, and embeds an RFID chip inside the bottle cap to support the NFC reading function. Although the overall demand environment has yet to recover this year, Qinghua 20's sales momentum is strong, and its turnover is fast, and channel profits maintain a certain advantage in competitive products at the same price. It is expected that Tsinghua 20 will maintain a growth trend higher than the company's average growth rate this year. At the same time, the company will enjoy benefits and control the distribution of Tsinghua 20 in a more refined manner. As a representative of Fenjiu's brand value, the company set up the Blue and White Division last year to lay out the basic work layout around the Qing30 in terms of community marketing, brand communication, and resource investment. It is expected that the revival edition is also expected to achieve higher goals this year.

Q2 Maintain a normal business pace, and the overall product line layout has obvious advantages. In the short term, the company mainly focused on normal sales and shipments in April and May, and maintained a normal off-season business pace in the second quarter. It is expected that sales progress in the first half of the year will remain basically the same as the same period last year, and channel inventory will be kept within a healthy level. The company's product line has outstanding advantages. Under industry fluctuations, it has strong ability to cross the cycle. The revival version maintains brand investment, and Qing20 continues to expand. Lao Baifen is the core strength of the lower back into the post-30 billion era. Bofen mainly focuses on the basic work of cultivating scented consumers and strictly controls volume in mature markets. The base market base in the province has a solid foundation, and the operation of all products has laid the foundation for the company's development. The market atmosphere in Shanxi outside the province is strong, and the market south of the Yangtze River, such as Jiangsu and Anhui, is still strong. In the medium to long term, the company's growth rate and quality are superior to those of its peers under industry stock competition, and its market share is expected to increase further. In addition to brand and product advantages, management capabilities, team execution, and channel control are continuously refined, and all-factor competitiveness is expected to continue to strengthen.

Profit forecast, valuation and rating: Maintain the company's 2024-2026 net profit forecast of 130.8/155.2/18.28 billion yuan, equivalent to EPS of 10.7/12.7/15.0 yuan. The P/E corresponding to the current stock price is 22/19/16 times, maintaining the “buy” rating.

Risk warning: The growth of the Blue and White Fen series fell short of expectations, and actual sales fell short of expectations.