Incident: The company released its 2024 three-quarter report. The first three quarters achieved revenue of 2.33 billion yuan, +15.3% year over year; net profit to mother was 0.33 billion yuan, +22.2% year over year. Looking at a single quarter, Q3 achieved revenue of 0.57 billion yuan, +15.8% YoY; net profit to mother was 0.038 billion yuan, +108.8% YoY. The results are in line with market expectations.

The high growth potential of more than 300 yuan is remarkable, and the expansion of markets outside the province is accelerating. 1. By product, 24Q3's revenue for products above 300 yuan/100-300 yuan/100 yuan or less was 0.16/0.31/0.08 billion yuan, respectively, +42.1%/+14.9%/-24.3% compared with the same period last year. The 24Q3 series grew at an impressive rate due to customer continuous operation, cultivation, and superposition order meetings. 100-300 yuan products were promoted in line with the peak season soft series order delivery on the basis of Q2 soft H3/H6 price increases, and star products under 100 yuan were mainly sold naturally under the influence of weak mass consumption and controlled promotions in the third quarter. 2. Looking at the subregion, the total revenue of the 24Q3 company in and outside the province was 0.37/0.17 billion yuan, respectively, +4.4%/+37.9% compared with the same period last year. The company is steadily increasing its share in the province. Channel inventory control is strict. The growth rate is affected by the short-term pace, but the long-term trend remains unchanged. The company continues to promote marketing transformation outside the province and actively cultivate markets in the North and East China. The results of adjustments to mature markets such as Shaanxi and Ningxia are gradually showing results. 3. Looking at each channel, 24Q3's dealer/direct sales (including group purchases) sales achieved revenue of 0.51/0.02 billion yuan, +10.3%/-38.4%, respectively.

Accurate investment optimizes rates, and increases the level of net interest rates. 1. The gross margin of 24Q3 was -1.5pp to 61.1% year-on-year, mainly due to increased promotion efforts such as tasting and giveaways. 2. The sales/management/R&D expense rates were 24.1%/13.1%/6.9%, respectively, -3.2pp/ -1.8pp/ -1.1pp. The company optimized its marketing strategy. Under refined cost control and reduced holiday promotions during the off-season, the year-on-year streamlining of sales expenses led to an increase in overall cost efficiency. 3. Most of the company's external donation expenses were transferred to the first half of the year, so Q3 non-operating expenses decreased by 12.05 million yuan year-on-year. 4. The net interest rate for 24Q3 was +0.8pp to 14.3% year-on-year. The net interest rate increased markedly due to cost optimization due to scale effects.

We are actively preparing to take the initiative, and the pace of development outside the province is speeding up. The company focuses on major customer operations and user building/consumption, consolidating the base market in Gansu Province; developing the northwest Gansu market on a rolling basis; steadily improving in Shaanxi, Inner Mongolia, Ningxia, Qinghai and other provinces; and gradually cultivating the second growth curve of the East China and North China markets. In the short term, high-end products worth more than 300 yuan are growing strongly. The province continues to cultivate the core market. The results of marketing transformation outside the province are gradually showing results, and the performance is steady. In the medium to long term, leading wine companies still have sufficient growth momentum through product line expansion and nationalization breakthroughs, further opening up room for growth.

Profit forecasting and investment advice. EPS is expected to be 0.80 yuan, 0.97 yuan, and 1.15 yuan respectively in 2024-2026, corresponding PE is 25 times, 21 times, and 18 times, respectively. The company continues to benefit from the national layout and product structure upgrades, is optimistic about the company's long-term growth capacity, and maintains a “buy” rating.

Risk warning: There is a risk of a sharp economic downturn, and the recovery in consumption falls short of the expected risk.