Profit forecast and investment advice: As a leader in fresh liquor, the company has a rich brand heritage, excellent organizational efficiency, perfect product hierarchy and differences in flavor, and is progressing smoothly in high-end and nationalization. It is one of the few companies in the liquor industry capable of crossing the cycle, and future development potential is expected to continue to be prominent.

We expect the company's net profit to be 12.72/15.24/18.09 billion yuan in 2024-2026, up 21.8%/19.8%/18.7% year on year, 10.4/12.5/14.8 yuan/share corresponding diluted EPS, and the current stock price corresponding PE is 21/18/15x, covered for the first time, giving it a “buy” rating.

The national reform has paid off, and the pace of steady growth is impressive. Fenjiu has a long history of culture. The company became the “boss of Fen” in the 90s of the last century, and later declined due to strategic losses. In 2009, the company's new leadership team initiated reforms. Performance continued to break through, but was also impacted by deep industry adjustments in 2012-2015. Since 2015, the rise of mass consumption has driven the recovery of the liquor industry. Against the backdrop of improving demand, the company launched a new round of state-owned enterprise reform in 2017 and has embarked on a path of accelerated development and gradual recovery. The company led the way in this upward cycle of liquor, and also showed strong performance resilience when the industry was sluggish in the past two years. In 2015-2023, the cumulative increase in the company's revenue CAGR/net profit CAGR/share price was 29%/45%/1433%, respectively, ranking 1/2/1 in the industry. Chairman Yuan Qingmao took over in 2022, and the company operated steadily and gradually moved towards the 50 billion yuan revenue camp. The company's revenue and net profit to mother in 2023 were 31.9/10.4 billion yuan (up 22%/29% year over year), ranking 4th in the industry.

The brand builds a foundation, and the organization strengthens the barriers first. 1) Brand advantage: The company is a leader in fresh liquor. The “Boss Fen” gene has built a high brand barrier, and there are few competitors in the high-end fragrance field.

2) Organizational advantage: Since 2017, the company has continuously deepened reforms, continuously optimized its talent team, organizational structure and marketing methods, and established the Blue and White Division to strengthen brand cultivation in 2023. 3) Product advantages:

The company has strong products in all price ranges that are mature, have potential for nationalization, and can be alternately distributed to support growth. Glass Fen is a star item among light bottle wines priced around 50 yuan. Blue and White 20 is a 10 billion single product with a price of 400 yuan. The mid-range wine Lao Baifen and Panama have been rapidly released in the past two years, and the high-end wine Blue and White 30 has been steadily cultivated. 4) Efficiency advantage: The company continues to use digitalization to empower marketing models, such as the launch of “five codes in one” in 2020 and the “enjoy benefits” in 2023, and the marketing efficiency and cost effectiveness ratio are constantly improving.

Improve your potential and move steadily and far to win the future. 1) Adequate growth tools: In recent years, the company's core growth gripper has progressed from “Blue and White 20+ Lao Bai Fen” to “Blue and White 20+ Old Baifen”. Blue and White 20 is gradually leaping from popularity in the political business scene to the growth of the popular scene, and it is expected that it will continue to seize market share south of the Yangtze River. The upgrading of Lao Baifen will reshape channel profits. Panama is expected to meet Lao Baifen's upgrade needs, and both are expected to expand steadily based on the Shanxi market. The Blue and White 30 revival edition puts price first and is released in an orderly manner. It is expected to further open up the company's development ceiling in the future. 2) Continued expansion outside the province: The company's market base in Shanxi and Huanshan is stable, and the 1 billion yuan market with sales outside the province continues to increase. The company's core market growth rate south of the Yangtze River in 2020-2022 was over 50%, and the growth rate was over 30% in 2023. Supported by brand potential and channel profits, the company is expected to make further breakthroughs in the Yangtze River Delta and Pearl River Delta regions in the future.

Risk warning: macroeconomic fluctuations, consumption power recovery falls short of expectations, and industry competition intensifies.