On August 22, 2024, Pearl River Brewery released its 2024 interim results report.

Key points of investment

Volume and price have risen sharply, and the trend of high-end development is obvious

The company achieved mid-term revenue of 2.986 billion yuan (+7.69% YoY), net profit to mother of 0.5 billion yuan (YoY +36.52%), and net profit after deducting non-attributable net profit of 0.476 billion yuan (+41.72% YoY). Looking at the 2024 single quarter, the company's revenue reached 1.878 billion yuan (+8.07% year over year), the growth rate increased from the first quarter of 2024, and net profit to mother reached 0.379 billion yuan (+35.63% year over year). In terms of volume and price breakdown, the company achieved a total sales volume of 0.6985 million kiloliters of beer in the first half of 2024, maintaining a steady growth trend. Among them, sales of high-end products increased 14.30% year on year, and the sales structure continued to be upgraded, driving the company's tonnage price to increase 6.19% in the first half of 2024 to about 4275 yuan/kilolitre.

Steady increase in gross margin, unleashing profit elasticity

Thanks to structural upgrades and other factors, the company's gross margin grew steadily to 49.03% in mid-2024 (same increase of 3.58pcts). The company's sales and management rates remained stable, achieving 14.38% (same increase of 0.29pct) and 6.37% (same decrease of 0.46pct), respectively, and the company's net interest rate of 17.10% (same increase of 3.46pcts), releasing high profit flexibility.

Profit forecasting

The company launched the first ultra-high-end product, Nanyue Huzun, with industry-leading technical accumulation and strength, and released high-end products such as 980mL Pearl River Puree, New English IPA, and 7 Fresh Pearl River Puree. Product strength upgrades drive the continuous advancement of high-end technology. We are still optimistic about the company's product strength and brand influence in dominant markets. Structural upgrades are steadily driving down superimposed costs, which is expected to unleash greater profit flexibility in the future. EPS is expected to be 0.37/0.43/0.50 yuan in 2024-2026, and the current stock price is 23/20/17 times PE, respectively, maintaining a “buy” investment rating.

Risk warning

Downward macroeconomic risks, increased competition in the industry, falling short of expectations in costs, insufficient production capacity construction or utilization, etc.