On July 10, 2024, Pearl River Brewery released the 2024 Interim Report performance announcement.

Key points of investment

The trend of structural upgrading continues, and profit growth is impressive

The company expects 2024H1 to achieve net profit of 0.476-0.531 billion yuan (year-on-year increase of 30%-45%), of which 24Q2 corresponds to net profit of 0.355-0.41 billion yuan (year-on-year increase of about 27%-47%). 2024H1 is expected to achieve net profit of 0.436-0.487 billion yuan after deduction (year-on-year increase of 30%-45%), of which 24Q2 corresponds to net profit of 0.332-0.382 billion yuan (year-on-year increase of about 26%-45%). The trend of upgrading the company's structure continued, and the interim profit maintained a high growth trend in the first quarter of 2024.

Volume and price have risen sharply, and cost improvements have increased year over year. The company takes achieving high-quality development as the main line and continues to optimize the product structure. We expect the company to continue the sharp rise in volume and price in the first quarter in the second quarter of 2024. Sales volume is expected to rise steadily year over year, and the tonnage price will increase in units. At the same time, thanks to the company's active efforts to reduce costs and increase efficiency, barley costs decreased year on year, and gross margin increased year on year, driving profit levels to improve year over year.

Profit forecasting

We are optimistic about the company's product strength and brand influence in dominant markets. Structural upgrades are steadily driving down superimposed costs, which is expected to unleash greater profit flexibility in the future. We slightly raised our 2024 profit forecast. We expect EPS to be 0.37/0.43/0.50 yuan for 2024-2026, and the current stock price corresponding to PE is 20/17/14 times, respectively, maintaining a “buy” investment rating.

Risk warning

Downward macroeconomic risks, intensification of industry competition, falling short of expectations in costs, falling short of expectations in building or utilization of production capacity, falling short of expectations in downstream demand, falling short of expectations in the high-end product market, etc.