Product side: Steady promotion of high-end technology, blue and white 20 billion consolidated foundation
Judging from the product structure of Fenjiu in Shanxi, the company has now achieved a full price band layout. Judging from the company's current product structure, the Blue and White 20 has now become the company's largest single product, and the sales volume of the Blue and White 20 successfully exceeded 10 billion dollars in 2023. The company's product structure has continued to improve in recent years, but the blue and white revival version of the company's high-end products in the 1,000 yuan price range is still in the position of a catcher. We believe that in the future, Fenjiu will still have three advantages on the product side: flavor advantage: Fenjiu is a leading fragrance company, especially in the middle and high-end fields. Compared with the fiercely competitive strong flavor sauce, Fenjiu has a better competitive pattern; brand advantage: Fenjiu is one of the four most famous wines, and has sold well all over the country, and has a deep brand heritage and consumer base; Matrix advantages: Currently, Fenjiu is one of the few wine companies that have achieved a full price range and has multiple strong single products.
Regional side: The leading position of the provincial base is stable. Nationalization is progressing steadily. Judging from Fenjiu's regional layout, the company has now achieved a nationalized layout. In 2023, the company achieved revenue of 12.084 billion yuan in the province and 19.659 billion yuan in revenue from outside the province. Since 2019, revenue from outside the province has continued to rise, and its share has continued to rise, becoming the main force driving Fenjiu's revenue growth. In 2023, the company's revenue growth rate outside the province was about 23%, and the revenue growth rate within the province was about 20%. Consumption in the provincial market continued to upgrade, driving the provincial market to achieve high growth. In the past 5 years, the company's compound revenue growth rate outside the province was about 37%, and the compound growth rate within the province was about 18%. The growth rate of the overseas market continued to lead the province. Judging from the nationalization situation, the company has formed an echelon layout of “base in Shanxi - Huanshan Market - East China and South China Market”. In 2023, the company's overseas market continued to grow faster than the provincial market. The 1-billion-level market continued to increase. In 2023, the core market south of the Yangtze River increased by more than 30% year-on-year, and the nationalization process was further expanded. Judging from the revenue share of major wine companies within and outside the province in 2023, Fenjiu accounted for about 62% of revenue from outside the province, leading the way among listed wine companies. Judging from the number of dealers inside and outside the province, Fenjiu has maintained rapid growth in recent years, expanding from 780 in 2016 to 3120 in 2023.
Continued improvement in management capabilities
According to Fenjiu's general program for revival, the “123 Program”, the details include: “1” is the goal of promoting Fenjiu's high-quality development in all aspects, and quickly take root in the first position of the Chinese wine industry; “2” means that before 2030, Fenjiu revival can be divided into two stages; and “3” is the three keys to achieving revival: management, market, and talent. The two stages are respectively. The first stage (2022 to 2024) is the development transition period and management upgrade period for Fenjiu revival; the second stage (2025-2030) is a period of consolidation of results and factor adjustment for Fenjiu revival. Judging from the situation in recent years, Fenjiu continues to improve its management capabilities through organizational structure adjustments and digital means.
Profit forecasting and valuation
Overall, we believe that whether at the product level or regional level, the company continues to interpret the logic of “stable basic market+gradual realization of potential space”, and it is expected that it will maintain a relatively rapid growth potential in the future. We expect the company's 2024/2025 EPS to be 10.91/13.22 yuan, and the PE corresponding to the latest closing price is 17/14 times. Considering the company's average valuation value of 43 times from 2005 to the end of June 2024, the company's current valuation has a certain cost performance ratio and maintains a “buy” rating.
Risk warning
1. Risk of demand fluctuations;
2. Risk of large price fluctuations;
3. Industry competition increases risk;
4. Risk that profit forecasting assumptions are untrue or fall short of expectations.