Key points of investment

Incident 1: On the evening of August 21, the new “Master Master” series jointly developed by Fenjiu and Xinhuadu Technology Co., Ltd. was grandly unveiled at the Fenjiu Museum in Xinghuacun, Shanxi.

Incident 2: On August 15, Jiuai Zhihe published the article “Exploring Trend Signals from Online Liquor Mid-Year Big Promotions”.

The report shows that during the 2024 mid-year promotion period, liquor sales on mainstream e-commerce platforms reached nearly 10 billion dollars, an increase of 39% over the previous year. Among them, famous liquor brands have been further favored by consumers on e-commerce platforms.

The “Master Master” series was released, and Fenjiu and Xinhuadu cooperation once again showed results. The “Master Master” series jointly developed by Fenjiu and Xinhuadu was officially unveiled. Fenjiu Group Chairman Yuan Qingmao, Fenjiu leaders Li Zhenhuan, Han Xiangyu, and Liu Weihua, and some Fenjiu Joint Stock Company executives and many senior group leaders all witnessed this important moment. The “Master Master” series released this time includes seven products: “Ling Qiong”, “Emperor Jian”, “Poetry Question”, “Imperial Palace”, “Wanshang”, “Fenjiu Master Artist AP Edition · Huadian”, and “Fenjiu Master Qishiwu Special Memorial Edition · Huazhang”. Each model profoundly reflects a glorious chapter in Fenjiu's history, and is a brilliant collision between traditional winemaking wisdom and modern innovative thinking. This series of products accurately anchors the high-end market and uses a limited edition of specially made 65-degree collectible Fenjiu as the base, highlighting the excellent quality of Fenjiu. Fenjiu and Xinhuadu have been cooperating since 2012. With its forward-looking top-level design concept and systematic strategic planning, Xinhuadu is committed to building a “Fenjiu Active Cultural Product Ecosystem” in the future, providing strong support for the continued value-added value of the Fenjiu brand. The release of the “Master Master” series is a concentrated display of the results of cooperation between the two parties.

Liquor e-commerce platforms are growing at a high rate, and Xinhua has fully benefited. 1) Looking at the industry as a whole, according to data from Jiuai Zhixing, e-commerce platforms have become an important channel for liquor sales. As of 24Q1, more than 50% of consumers chose to buy alcohol products online. Meanwhile, this year's 618 new gameplay increased the participation of online Internet users in the big promotion. In 2024, the number of active users on all major e-commerce platforms showed varying degrees of increase over the same period last year. Although the mid-year promotion is a low season for liquor consumption, e-commerce platform sales have brought growth to the liquor market. In May-June 2024, the overall online sales volume of liquor reached 19.8 billion yuan, up 73% year on year. Among them, during the mid-year promotion period, liquor sales on mainstream e-commerce platforms reached nearly 10 billion yuan, an increase of 39% over the previous year. Famous liquor brands all achieved year-on-year and month-on-month sales growth during this big promotion. The market position of leading wine companies has been further stabilized, with a brand concentration of 88%.

2) From a corporate perspective, Jiuai Zhihe, a wholly-owned subsidiary of Xinhuadu, published the 618 war report. During the 618 period, the company collaborated with 15 alcohol brands, enabling the GMV growth rate of leading liquor brands to exceed 50%, and the customized liquor single product series broke through 0.08 million boxes, highlighting market vitality and brand strength.

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%. Net profit due to mother is expected to be 0.27/0.34/0.43 billion yuan, respectively, with a year-on-year growth rate of 36.3% /25.4%/25.2%, maintaining 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.