Incident: On June 28, 2024, Wuliangye held the 2023 Annual General Meeting of Shareholders. At the meeting, the company fully introduced the company's business situation, future strategy and development goals in 2023, which strengthened investor confidence. The summary feedback is as follows:
Enrich the product matrix and create brand value. The company's product structure has been continuously improved, and Shangxin Ziqi Donglai Wuliangye, 45/68 degree Wuliangye, etc. have been replaced with Wuliangchun. In terms of main brands, the company will enrich and improve the 1+3 product matrix. 1) Intergenerational wine series: Control and reduce the share of Eighth Generation Wuliangye in main products, and increase the proportion of products at 1618, 39, 45, and 68 degrees. Currently, Eighth Generation Wuliangye stocks are healthy and maintained double-digit growth during Dragon Boat Festival; 2) Vintage wine series: launch classic 10/20/30/50 to seize the market of 2,000 yuan or more; 3) Cultural Liquor: Strengthen the development of cultural wine series; 4) Strong aromatic wine series: centered on major products such as Wuliangchun, Wuliangol, Tetouqu, and Jianzhuang, etc., to optimize the product structure and deeply cultivate different market segments. Among them, Wuliangchun focuses on the construction of the highland market, and Wuliangol is deeply involved in the banquet market. Tedouqu and Jianzhuang have each implemented differentiated regional operations and optimized product structures. In terms of price layout, the company meets consumer demand at different levels through differentiated products, using 39 degrees to cover the 700+ yuan price band, 45 degrees to cover the 900 yuan price band, and 1618 to seize the competitive share of the same price band. With its stable and rapid growth, the company made up for the Eighth Generation Wuliangye reduction gap, thus promoting a steady increase in the price of Eighth Generation Wuliangye. There are four products launched by Classic Wuliangye: Classic 10 is worth 2000+ yuan, 20 is 5,000 yuan, 30 is 10,000 yuan, and 50 is an ultra-high-end product of 30,000 yuan or more.
In the future, the company will continue to optimize the product structure and promote high-quality enterprise development.
Close to market needs, optimize channel layout, and pay attention to dealer interests. The classic Wuliangye channel model uses a platform-based model to build a community of destiny for manufacturers. Through group buying dealers and platform customers, it is planned to focus on the market in Jiangsu, Beijing, Guangdong, and Shanghai. By establishing 26,000 terminals, the company has covered a wide sales network, and has also expanded the brand's market coverage through emerging channels such as Douyin, Kuaishou, WeChat Video and other platforms. At the same time, the company attaches importance to the interests of dealers, actively guides merchants to ship at smooth prices, resolves channel conflicts, increases profit from price differences, and raises the profit level of merchants. In domestic and foreign markets, the company has successfully expanded domestic and foreign markets by visiting and developing large enterprises, carrying out return tours, and operating old wine, etc., and the construction of overseas channels has achieved full coverage of the main stores of China Free Group. In addition, the company is leading the high-quality development of enterprises through the return of brand value. Through the HeMei Pentalogy and the promotion of the Hemei Global Brand Culture Campaign, the company focuses on top political and business platforms, high-quality media resources, and high-end circle marketing, effectively enhances brand image and value, leads consumer mentality, and helps high-quality terminal marketing.
Scientifically grasp the pace of marketing, pay attention to investor returns, and promote the steady development of enterprises. The company insists on steady progress, takes into account current growth and long-term development in an integrated manner, and continues to achieve high-quality enterprise development with a steady growth trend. Currently, Wuliangye has a clear leading edge in the 1,000 yuan price range. At the same time, the company focuses on cost efficiency, accurately identifies market structures and merchant capabilities through digital means, optimizes cost investment, and improves cost efficiency. Since the company went public, cash dividends have exceeded 10 billion yuan per year for 4 consecutive years. Among them, the proposed dividend of 18 billion yuan in 2023 is 60%, an increase of 5 percentage points over the previous year. The annual increase is the highest among high-end liquors. The dividend scale is the third largest in Shenzhen, and the number one listed liquor company in Shenzhen for 9 consecutive years.
In the future, with the steady development of the company, cash dividends and dividend rates will be further increased. The management is optimistic about the 24-year business goals. It will continue to focus on improving Wuliangye's brand value, strengthening quality brands and consumer cultivation, increasing profits, and promoting the return of price to value.
Profit forecast and investment advice: I am optimistic that the company will continue to enrich its product matrix. The price of the 8th generation Wuliangye is rising steadily, the profit level of dealers continues to increase, and Dragon Boat Festival sales performance is excellent. We expect to achieve revenue of 927.08/1038.73/116.907 billion yuan in 24-26, net profit of 338.34/385.52/44.205 billion yuan, PE of 14.69/12.89/11.24x respectively. As a representative enterprise of strong flavored liquor, the company has strong brand strength. Currently, the valuation is marginal and maintains a highly recommended rating.
Risk warning: Macroeconomic growth falls short of expectations; industry competition increases risks; food safety risks; risks where reforms fall short of expectations.