occurrences

The company achieved revenue of 23.744 billion yuan in the first half of 2024, -0.53% year-on-year, and net profit to mother of 4.705 billion yuan, +1.20% year-on-year. 24H1 gross margin/sales and distribution expense ratio/administrative and other expenses ratio/net margin were 46.91%/17.64%/6.27%/19.82%, respectively, +0.87/+1.25/ -0.33/0.34pct, respectively. The increase in gross margin mainly benefits from structural upgrades in the beer and liquor business, as well as improvements in raw material costs; the increase in sales expenses is expected to be mainly related to increased investment in the liquor business. Revenue was in line with expectations, and profit was slightly lower than expected.

Core points

Beer: Revenue of 22.566 billion yuan, -1.43% YoY; of which sales volume was 6.348 million tons, -3.39%; tonnage price 3,555 yuan/ton, +2.03% YoY; tonnage cost 1,927 yuan/ton, +0.91% YoY. The decline in sales was mainly affected by high base numbers and heavy rainfall in some regions.

Gross margin increased 0.6 pct to 45.8% year over year. The operating expenses of the beer business were basically the same as in the same period last year. For the first time, 24H1's mid-range and above beer sales accounted for more than 50% of sales in the first half of the year.

Sales of sub-premium beer and above achieved unit growth compared to the same period last year. Among them, e-commerce channel sales increased by about 60% year on year, sales of premium beer and above increased by more than 10% year on year, sales of products such as Heineken, Lao Xue, and Red Jue increased by more than 20% year on year, and pure raw sales of core products also achieved positive year-on-year growth.

Liquor: Revenue of 1.178 billion yuan, +20.6% year over year, gross margin increased 2.1 pct to 67.6%.

The sales scale of the Group's liquor business is growing rapidly. Among them, the sales volume of national high-end single product summaries increased by more than 50% compared to the same period last year, contributing about 70% of the liquor business turnover.

Profit Forecasts and Investment Ratings

Under a low base, the company's beer sales are expected to improve sequentially in the second half of the year, the cost side will continue to improve in the second half of the year, and gross margin is expected to increase throughout the year. In the future, the company will step up efforts to develop diversified and personalized products, and at the same time begin to build new consumption scenarios and places, such as online and in-home consumption. Liquor adheres to the dual brand operation of Sands and Digest, and the subsequent focus is on making up for Sands's growth shortfall. This year's dividend rate is expected to remain around 40% of the normal level of previous years. Based on this, we expect the company's revenue for 2024-2026 to be

39.227/40.197/41.209 billion yuan (originally forecast 2024-2025 was 41.283/44.431 billion yuan), up 0.76%/2.47%/2.52% year on year, net profit to mother 5.404/6.066/6.747 billion yuan (originally forecast 2024-2025 was 6.99/8.477 billion yuan), up 4.88%/12.24%/11.24% year on year. EPS for the next three years will be 1.67/1.87/2.08 yuan, respectively. Corresponding to the current stock price PE is 13/12/11 times, respectively, maintaining a “buy” rating.

Risk warning:

Food safety risk; risk of fluctuating raw material prices; risk of high-end products falling short of expectations.