Key points of investment:

The company released its 2024 mid-year report: in the first half of the year, the company achieved revenue of 1.754 billion yuan, an increase of 15.17% year on year; realized net profit deducted from mother 0.302 billion yuan, an increase of 19.08% year on year. Among them, revenue of 0.678 billion yuan was achieved in the second quarter, up 7.73% year on year; net profit without return to mother was 0.08 billion yuan, up 10.56% year on year.

Sales maintained a high level of growth, but the increase subsided from the same period last year. 2024H1 revenue increased 15.17% year over year, 9.08 percentage points lower than 24.25% in the same period last year; net profit after deducting non-return to mother increased 19.08% year over year, 2.57 percentage points lower than 21.65% in the same period last year.

Furthermore, growth in the second quarter narrowed month-on-month: compared to the first quarter, revenue growth in the second quarter narrowed by 12.68 percentage points (up 20.41% in the first quarter), and the increase in net profit narrowed by 11.92 percentage points (up 10.56% in the first quarter). The company's growth is still strong, but the momentum has subsided. The next third and fourth quarters will be the peak season for liquor consumption, and the company's sales growth is expected to boost.

The increase in main gross margin was due to continued high sales growth and a systematic decline in costs.

In the first half of the year, the company's consolidated gross margin reached 65.12%, an increase of 1.36 percentage points over the same period last year. The overall gross margin continued to rise, mainly due to continued high sales growth and a systematic decline in costs. In the current period, the revenue increase was 4.32 percentage points higher than the cost — in the year when macro-inflation declined, the cost environment for enterprises was relatively friendly, which was the main reason for the increase in the gross margin of the main business.

The domestic market is growing well, and the growth of the outside of the province is slowing down. According to IFIND, the provincial market achieved revenue of 1.349 billion yuan in the first half of the year, an increase of 16.84% over the previous year; revenue accounted for 76.89%, an increase of 1.11 percentage points over the previous year. In the first half of the year, the overseas market achieved revenue of 0.376 billion yuan, up 7.79% year on year; revenue accounted for 21.42%, down 1.47 percentage points year on year. The provincial market has maintained a relatively rapid growth rate.

Inventory turnover increased significantly. In the first half of the year, the inventory turnover ratio was 0.4 times, up 5.26% year on year. The inventory turnover ratio continued to increase since the same period in 2020, up 29.03% from the same period in 2020.

Various cost rates have declined. In the first half of the year, sales, management, and R&D expenses all declined year-on-year, falling 1.86, 1.09, and 0.69 percentage points, respectively, to 19.16%, 9.7%, and 1.32%, respectively. As sales growth subsided, the company's control over costs was also strengthened.

Investment rating: We forecast the company's earnings per share for 2024, 2025, and 2026 to be 0.81, 0.96, and 1.12 yuan, respectively. Referring to the closing price on September 4, the corresponding price-earnings ratios were 20.69, 17.44, and 14.91 times, respectively, giving the company an “increase in holdings” rating.

Risk warning: The increase in profit due to the systematic decline in costs is cyclical; the decline in the product structure will lead to a decline in profit levels; weak social consumption affects various consumer markets, and sales uncertainty is high.