Key points of investment

Xinhuadu: An internet marketing company that is deeply involved in the liquor business. The company officially completed a comprehensive strategic transformation in 2023, divesting the loss-making traditional retail businesses such as supermarkets and department stores, and focusing on the main Internet marketing business operated by the wholly-owned subsidiary Jiuaijihe. In 2016-2023, the company's internet marketing business continued to expand, with revenue growing from 0.3 billion to 2.75 billion, with a compound growth rate of 37.2%. In June 2024, the company launched a new phase of the incentive plan. The full exercise target is to unlock a compound net profit growth rate of 30% from 2024-2026, that is, the company's net profit will reach 0.26/0.34/0.44 billion yuan respectively in 2024-2026.

The importance of e-commerce sales in the liquor industry has increased, and now wine companies need support from professional operators. Online liquor is gradually becoming an important sales position. Currently, wine companies need professional online service providers to provide operational support. First, because the online traffic dividend is gradually fading away and the difficulty of draining is increasing; second, wine companies have insufficient experience in online operations; third, online businesses currently account for a relatively low share of online business, and online operators are needed to provide comprehensive, omni-channel online marketing services.

Deep cooperation with leading brands and strong operational capabilities to build core competitiveness. The founder has experience in internet marketing. He began in-depth cooperation with leading brands in 2012, and has a first-mover advantage; at the same time, the company accurately uses data technology in operations, and its digital marketing capabilities are constantly being enhanced. The enterprise's business covers many fields and has strong resilience to risks; it has deep consumer insight and outstanding brand operation ability.

Live e-commerce has broad prospects, and its own businesses are expected to open up a second growth curve. The company actively cooperates with Doukuei live streaming experts and cooperates with brands to develop a variety of customized products to further enhance the company's profitability.

Investment advice: The company's revenue is expected to be 3.9/4.94/6.08 billion yuan in 24-26, with a year-on-year growth rate of 38.1%/26.6%/23.1%. The estimated net profit to mother was 0.27/0.34/0.43 billion yuan, respectively, with a year-on-year growth rate of 36.

3% /25.4%/25.2%, covered for the first time, giving a “buy” rating.

Risk warning: the progress of online liquor falls short of expectations; competition in the online liquor business increases risk; risk of brand licensing management; risk of falling short of expectations in the development of own business names; risk of online liquor sales policy.