The company's recent situation
Recently, Fenjiu's stock price has pulled back quite a bit, and the market is concerned about its booming demand and the effects of channel reforms. We believe that current consumption of liquor at all prices is concentrated at the top. Fenjiu benefits from brand and flavor advantages. Sales are still steady. Looking forward to the future, the boom is expected to continue, and the current valuation is relatively cost-effective.
reviews
Look at off-season performance: blue and white potential continues, and waist products accelerate month-on-month. According to our research, the off-season sales of Fenjiu are relatively steady. In the Huanshan market, Qinghua20's cost performance ratio is prominent in the business scenario, and its high brand recognition has enabled it to seize competitive share, and its market share continues to increase at the 400 yuan price; in the market south of the Yangtze River, Fenjiu benefits from higher channel profits and a well-accepted flavor, continuing its positive growth trend. Terminal sales rate and consumer sell-out rate continue to increase. Lao Baifen's banquet market is gaining momentum rapidly in the 100-300 yuan banquet market in Huanshan. We expect 2Q24 waist products to accelerate month-on-month growth; moreover, appropriate increases in the second quarter will meet market demand, which is expected to provide steady growth in the company's performance.
Look at channel reform: “Enjoy Rewards” has a clear strategic direction for optimizing and sorting channels, and there is room for flexible adjustments. The company's channel introduced the “Enjoy Rewards” model, and through a digital system+fuzzy rebate, the focus was on high-quality dealers and terminals. According to our channel research, in the short term, due to some merchants not adapting to the “vague” rebate format and questioning their own profit situation, combined with limited sales volume during the traditional off-season in the second quarter, the “Enjoy Rewards” promotion progress has slowed marginally. We believe that sorting out the company's channels and optimizing the dealer team is a medium- to long-term direction. The reform direction led by “Fenenjoy Rewards” is correct, and the company can adjust it according to market conditions, such as vague rebates and clear rebate ratio adjustments. The company team responded quickly to the market, and the channel reform is expected to advance more steadily in the third quarter.
Look at the long-term space: blue and white lead, product structure is perfect, and the trend of nationwide expansion continues. We believe that the company's advantage lies in its balanced product structure and rich growth grippers under brand and fragrance endowments.
The national expansion of Blue and White 20 is progressing steadily, and Blue and White 30 is leading the brand upward. The company proposed to promote the Waist Panama & Laobaifen series this year to upgrade and sort out the price system. We believe that in the future, waist products will benefit from an increase in the concentration of alcohol used in the banquet scene in the Shanxi region, and there is still plenty of room for expansion; in addition, Bofen is the basic model for the company's flavor cultivation, and it is expected that it will continue to provide performance certainty.
Profit forecasting and valuation
We basically maintained our 2024 profit forecast of 13 billion yuan. Considering the phased impact of channel reform on dealers' repayment enthusiasm, we lowered our 2025 profit forecast by 4.5% to 15.3 billion yuan. Due to a decline in the sector valuation center, the target price was lowered by 14.6% to 258 yuan, corresponding 24/21 times P/E in 2024/25, and the current price corresponds to 17/15 times P/E in 2024/25, with 41.5% upside.
risks
Blue and white sales and nationwide expansion fell short of expectations; macroeconomic pressure is under pressure, and liquor consumption scenarios are limited.