Incident: On June 27, 2024, Luzhou Laojiao held the 2023 Annual General Meeting of Shareholders. At the meeting, the company gave a full introduction to the company's business situation, future strategy and development goals in 2023, which strengthened investor confidence. The summary feedback is as follows:
Facing industry challenges, Luzhou Laojiao showed steady management and strategic patience. Faced with the decline in sales in the entire liquor industry since the second quarter of last year, the company adopted a prudent market strategy, emphasized adherence to healthy growth goals, and clearly opposed pressuring dealers, terminals, and consumers for short-term targets. The company believes that in the face of the downturn in the economic cycle and severe market challenges, it insists on pursuing healthy growth to ensure that the long-term development of the company is not sacrificed to pursue short-term performance.
Actively promote the strategic layout of the supply chain and ecological chain to enhance core competitiveness. The company laid out the “14th Five-Year Plan” supply chain strategy. Fundamental reforms and transformations have been carried out from the company's winemaking production system to the construction of the Huangjiao Brewery Ecological Park, to the entire supply chain, including packaging, storage, and transportation systems, to the marketing system. Looking ahead to 2025, the company will basically complete the strategic layout of the “14th Five-Year Plan” supply chain, and the “15th Five-Year Plan” period will focus on the ecological chain strategy. This series of strategic layouts has laid a solid foundation for the company's medium- to long-term development.
Digital transformation has brought unprecedented market responsiveness and efficiency to enterprises. The company attaches great importance to digital transformation. The launch of the five-code product is a major digitally driven initiative in Luzhou Laojiao, strengthening product flow monitoring and real-time analysis of market data. The promotion of digital strategies enables the company to respond more quickly to market changes, optimize resource allocation, and improve operational efficiency. Driven by digitalization, the company aims to achieve flat management this year. Only management and practice levels will improve the work efficiency of salesmen and help the market develop. The five-code system is only the beginning of a revolution in the company's management system. The digital model is driving the company to form new competitiveness and achieve a revolutionary leap forward.
A sensitive grasp of consumer trends ensures that product strategies match market needs. Luzhou Laojiao attaches great importance to future consumer trends, particularly the rise of the post-00s consumer group. The company plans to adjust its marketing strategy to better adapt to this group's emphasis on “taste” and preferences.
The company is also actively adjusting its product line to meet future market demand for “high grade” and “high gimmick” high-end wines, thus maintaining a leading position in a competitive market.
Stable performance in the face of market fluctuations. Guojiao 1573 has 430,000 tons of raw wine stored, of which high-quality wine accounts for more than half, and stocks of finished wine also exceed 30,000 tons. Currently, there are no production capacity bottlenecks. Luzhou Laojiao provided sufficient supply guarantees when market demand picked up. It is worth mentioning that although dealers are currently facing greater inventory pressure, the inventory status of terminals and consumers is very healthy, showing the market appeal of the company's products and the continued demand from consumers. Looking forward to the future, especially during traditional peak sales seasons such as Mid-Autumn Festival and National Day, as liquor sales pick up, the company expects to quickly seize market opportunities and further consolidate its leading position in the high-end liquor market.
Profit prediction and investment advice: Optimistic that the company will actively promote the strategic layout of the supply chain and ecological chain, drive the management system revolution with digitalization, and continue to enhance competitiveness. We expect to achieve revenue of 372.75/447.31/53.447 billion yuan in 24-26, net profit of 163.02/199.23/24.217 billion yuan, corresponding PE of 13.38/10.95/9.01x, respectively, maintaining the recommended rating.
Risk warning: risk of macroeconomic growth falling short of expectations; risk of increased industry competition; risk of food safety.