Incident: On June 28, 2024, Alcoholic Liquor 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:

Product sales are improving, and three series and multiple categories are developing collaboratively. The company insists on the collaborative development of the three major series: Naisen, Alcoholics, and Xiangquan. The product line covers high-end, middle and high-end markets, and the advantages continue to expand as consumer demand diversifies. By product, product inventory was not in place in the first quarter due to the transition period for the launch of Naisen (Jiachen Edition), and supply was insufficient. Normal deliveries gradually resumed in the second quarter, and sales performance improved. Focusing on Hunan Province, the Jiachen version was gradually replaced with the old Naisen version, and the price of the old Naisen version rebounded slightly. The company will adhere to the profit sharing model and adopt a price stabilization strategy while protecting the interests of dealers. The 23-year reform of fees for alcoholics has achieved remarkable results. From the traditional cooperation model where expenses were mainly used to support dealers, it has shifted to terminals and consumers, driving dealer sales through consumer opening bottles and terminal decontamination. The company insists on creating large single products. With the increase in C-side expenses, the number of banquets and bottle opening data has increased dramatically, and the proportion of alcoholic series such as Red Tan has increased. After a period of rapid development, domestic sales feedback was good, and it is the main force in the 100-200 yuan price range. The company will gradually launch mass products from Xiangquan and carry out pilot work in some regions, focusing on the price range below 100 yuan. Performance is expected to improve.

Accelerate model market construction and optimize channel layout. The company will focus on model market construction and channel construction for the sinking market within the province. The province focused on the strong regions of Changzhu Tan and western Xiangxi, and set up a special Hunan division to promote intensive channel cultivation and sinking. Outside the province, it mainly targets Hongtan as a model market, focusing on model market creation and resource breakthroughs. At the same time, considering the balance between market contraction and revenue, key markets such as Henan, Hebei, and Shandong are also heavily skewed. Currently, stocks in some regions outside the province are still being digested; stocks within the province are healthy and turnover is normal. Specific measures to reduce terminal inventory: 1) Strengthen network construction and optimize sales networks; 2) Conduct marketing through digital means such as code scanning activities to achieve accurate delivery; 3) Understand market data through product control, stabilize wholesale prices, and reduce bargaining and random prices. The company considers the balance between cost reform and dealers' enthusiasm to repay, and gradually increases C-side investment to promote sales. Dealers' investment will gradually increase when prices are stable, which means restoring dealer confidence. At the dealer network level, the number of participating dealers has been optimized from 700-800 to around 400 at present.

Strengthen Red Tan's big single products and adjust strategies to meet new challenges. On the basis of prioritizing the big single products in Hongtan, the company will gradually adopt a pilot approach to invest in consumption and create an atmosphere in model markets and classified markets. Red Tan performed well with the support of fees. Currently, the demand layout of the Hongtan market is better than that of the mass market. The mainstream market of 10-20 billion dollars in the province is concentrated in the 100-300 yuan price range. At the same time, the Xiangquan series has been affected by production capacity construction in the short term, and it is currently difficult to cover large-scale volume demand. In the provincial market, the company's brand power and consumer awareness are high, laying a good foundation for improving its performance in the township market. In addition, channel resource allocation is more refined, and personnel and resources are allocated by product for different markets. From previously distributed to regional regions, business indicators have now been refined to product refinement to salesmen, improving resource investment efficiency.

Profit forecasting and investment suggestions: Optimistic about the company's deepening cost reform, speeding up channel layout, and continuing to cultivate consumer groups, thus driving the rise of rich fragrance potential. We expect to achieve revenue of 31.35/37.27/4.498 billion yuan in 24-26, net profit to mother of 731/8.62 billion yuan, and PE of 19.50/16.53/13.63x respectively, maintaining the recommended rating.

Risk warning: Macroeconomic growth falls short of expectations; industry competition increases risks; food safety risks; risks where reforms fall short of expectations.