Note: Since May, the company's stock price has recovered by more than 30%. First, the price of Maotai fell at the industry level. Combined with feedback from some regions, the performance was poor under the high base of the second-quarter banquet scenario, and expectations of a decline in industry sentiment weakened. Second, at the company level, there are differences and concerns in the market about the company's Q2 product structure, inventory performance, promotion effects of the benefits, and annual results. We exchanged views with all parties. The core views are as follows:

Disagreement 1: In the short term, the market is worried that the decline in the Q2 product structure will affect profit growth. In reality, Q2 is more about increasing the volume of waist products, and the impact on profit margins is limited. The company responded that the annual target and structural strategy remained unchanged. The repayment ratio remained normal at about 20% in the second quarter. Structurally, the Blue and White Series Q1 grew at a fast pace of about 35% +. Among them, the Blue 20 growth rate was about 40%, and the growth rate of the Blue and White Series slowed slightly in the second quarter. Bofen's progress in the first quarter was slower than the whole year, and the pace accelerated in the second quarter, but the growth rate of waist products, especially Laobaifen, in the second quarter was more obvious (mainly due to the company's efforts to raise prices for waist products in June), so the evaluation had little impact on profit levels. Furthermore, considering the low season in the second quarter, the market spending was slightly higher than in previous years, and the profit growth rate in the first half of the year is expected to be about 5%-10% higher than revenue.

Disagreement 2: The mid-term market is worried that channel profits and enthusiasm will be affected during the run-in process. The company is already actively communicating and working to improve efficiency, and it is expected that channel profits will still be maintained. Judging from the company's past experience, the company has also always placed maintaining high channel profits in an important position. Fenenjoy courtesy is an important gripper for the company's digital transformation. The core of the process of promoting run-in is to stabilize channel confidence. In response, the company will hold dealer meetings to strengthen communication and mutual trust with the channel. Second, actively optimize processes to improve efficiency and shorten the fee payment cycle. There may be significant improvements in the third quarter. The third is to gradually strengthen staffing in some regions, strengthen publicity and education for channel operators and terminals, enhance terminal business proficiency and execution, and ensure the smooth progress of the Fen Rewards model.

Disagreement 3: The market also has differences over the industry and the company's long-term business situation. We believe that the company's product structure has advantages in the current demand environment and is expected to move through the cycle smoothly. First, in terms of business goals, the company's annual revenue target of around 20% remains unchanged during the year, and the pace of repayment and delivery is normal. Looking at the company's management's understanding of the market rationality for a long time, they are ready to fight a protracted war and strive to gradually increase market share on the premise of safeguarding market health. Second, in terms of business strategy, the company's product structure has advantages in the current demand environment. Mid-range and high-end products continue to be cultivated. Big Single Product Qing20 focuses on breaking through the Southern Market and continuing to increase its share. At the same time, it flexibly adjusts strategies according to current consumer trends, strengthens the 100-300 yuan price band layout, and measures the waist products Panama and Lao Baifen. Third, in terms of talent reserves, the company has been selecting outstanding regional managers and business backbone in an orderly manner since last year, continuing to enrich the organizational structure, and strengthening talent reserves for the still empty southern market.

Channel feedback: Fundamentals remain healthy, repayment and delivery are progressing normally, and batch prices for various product lines remain stable. Based on channel feedback, Fenjiu's repayment schedule reached 60% + in the first half of the year. Revenue is expected to grow by about 20%. Preparation for the Mid-Autumn Festival National Day peak season progressed normally in the third quarter, and the repayment schedule before the peak season is expected to reach about 90%. After the demand boom on the retail side declined in the second quarter, shipping turnover for Yaowei Lao Baifen, Panama, etc. accelerated markedly, and Bofen's shipments accelerated marginally. Although local feedback inventory increased slightly to 2 months, the horizontal comparison still maintained a healthy level, and the price system for various product lines remained stable.

Investment advice: Performance flexibility and certainty are still strong, the fundamental boom continues, and the “strong” rating is maintained.

The company's business goals remain unchanged throughout the year, indicators such as turnover, price, and inventory remain healthy, and the flexibility and certainty of annual statements are still strongly guaranteed. In the medium to long term, Fenjiu products have strong structural cost performance advantages. Brand potential and category differentiation advantages remain unchanged. The efficiency of the marketing system is expected to improve, and the smooth transition through the cycle. The company's current valuation is only 17 times that of 24 years, and has a certain cost performance advantage. We maintain the company's profit forecast. We expect EPS to be 10.71/13.17/16.11 yuan for 24-26, maintain a target price of 350 yuan, and maintain a “strong push” rating.

Risk warning: Consumption recovery is falling short of expectations, and the nationalization process and high-end product cultivation are falling short of expectations.