Description of the event

Luzhou Laojiao released its 2024 mid-year report: Among them, the company's 2024H1 gross revenue was 16.905 billion yuan (+15.84% YoY), net profit to mother was 8.028 billion yuan (+13.22% YoY), after deducting non-net profit of 7.994 billion yuan (YoY +13.54%). The company's total revenue for 2024Q2 was 7.716 billion yuan (YoY +10.51%), net profit to mother was 3.454 billion yuan (YoY +2.24%), after deducting non-net profit of 3.442 billion yuan (+2.68% YoY).

Incident comments

Revenue increased by double digits in the second quarter, and increased by single digits after considering contract liabilities. The company's total revenue for 2024Q2 was 7.716 billion yuan (+10.51%) and total operating income +△ contract debt was 7.523 billion yuan (+4.63% year over year). By product, 2024H1 medium- to high-priced alcohol achieved revenue of 15.213 billion yuan (+17.12%), with a 25.71% year-on-year increase in price and 6.84% year-on-year decline. The price reduction of medium- to high-priced alcohol is expected to be related to the company's increased investment in red envelopes. Other alcoholic beverages achieved revenue of 1.625 billion yuan (+6.86% year over year), of which volume increased 0.56% year over year and price increased 6.27% year over year. The company's total revenue in the first half of the year increased 15.84% year on year, and the revenue growth rate in the first half of the year was faster than the annual revenue growth target.

Profit growth in the second quarter was slow. Among them, gross margin increased slightly and management expense ratio optimization could basically offset the slight increase in sales expenses. The profit growth rate was significantly slower than revenue growth, mainly due to significant increases in sales tax rates and income tax rates. The company's 2024q2 net profit margin fell 3.62 pct to 44.76% year on year, including gross margin +0.17 pct to 88.81% year on year, sales expenses ratio (+0.73 pct year on year), management expenses ratio (year on year -0.58 pct), R&D expenses rate (+0.04 pct year on year), financial expenses rate (+0.52 pct year on year), sales tax and surcharges (+2.22pct year on year), income tax rate (+0.41% year on year).

Currently, the company's revenue side is two-wheel drive, and the company has strong flexible adjustment capabilities. At the same time, mid-range wines are gradually leaving the adjustment period and are expected to continue to contribute to new growth. EPS is expected to be 10.24/11.64 yuan in 2024/2025, corresponding to the latest PE of 11/10 times, maintaining a “buy” rating.

Risk warning

1. Industry demand falls short of expectations;

2. Increased market price fluctuations, etc.