Incident: The company released its 2024 three-quarter report. 24Q1-Q3 achieved revenue of 19.069 billion yuan, +19.53% year over year; realized net profit of 4.746 billion yuan, +24.49% year over year; realized net profit deducted from non-mother 4.7 billion yuan, +25.55% year over year. On a quarterly basis, 24Q3 achieved revenue of 5.263 billion yuan, +13.36% year over year; realized net profit of 1.174 billion yuan, +13.6% year over year; realized net profit after deducting non-return to mother of 1.159 billion yuan, +14.52% year over year.

Revenue was in line with expectations, and Huijiu's leading management resilience was evident. Against the backdrop of increased competition in the industry and slow recovery in demand, the company achieved revenue of 5.263 billion yuan in single Q3, +13.36% over the same period. The current channel payment schedule is in line with expectations. The current channel payment schedule is in line with expectations, and inventory has risen slightly year over year but is at a manageable level. Huijiu Jiu has shown operational resilience.

On the payout side, as of 24Q3, the contract debt was 1.936 billion yuan, or -41.6% YoY /-12.8% month-on-month. Affected by weakening demand, the advance receipt reservoir declined. 24Q3 sales revenue of 5.46 billion yuan was slightly higher than revenue, +24.6% year-on-year.

Gross margin fluctuated slightly, rate optimization continued, and performance flexibility continued to be realized. On the profit side, the company achieved a gross profit margin of 79.71% in 24Q1-Q3, +0.67pcts year on year, of which 24Q3 gross profit margin was 77.87%, or -1.55pcts year on year. On the rate side, the cost rate for the 24Q3 period was 28.98%, -5.02pcts year-on-year, with sales/management/R&D/finance expenses rates of 23.01%/6.07%/0.35%/-0.45%, respectively, and -5.32/-0.14/+0.02/+0.43pcts year-on-year, respectively. Furthermore, the 24Q3 income tax rate increased by 1.5 pcts year on year to 27.6%. Under the combined influence, the net profit margin for 24Q3 was 22.3%, +0.05 pct year on year. We believe that the company has increased its expenditure on the banquet scenario, but the accuracy and usage efficiency of the overall fee allocation are still improving with the introduction of a digital management system, and continuous optimization on the rate side drives the flexible implementation of performance.

The basic management is of high quality, the product structure is perfect, and there is still room for profit due to improved cost efficiency ratio. We believe that in the process of weak recovery in demand and the squeezing growth of the industry, the company's channel construction and ground team advantages are prominent. At the same time, the product structure of the provincial market is perfect, sales of individual products with core prices such as Gu5/Gu 8 are stable, banquet investment increases market awareness to cultivate products above Gu 16, there is still room for the sinking market within the province, and the national expansion echelon outside the province is gradually taking shape. The company's stable product line and strong control of regional channels together shape stronger cyclical resistance and two-way ability to attack and defend, and focus on the company's profit-side release performance under improved product structure and refined cost investment.

Profit forecast and investment advice: We expect revenue of 23.947/27.582 billion yuan in 2024-2025, up 18.2%/15.2% year on year; net profit to mother is 5.613/6.692 billion yuan, up 22.3%/19.2% year on year, maintaining the “recommended” rating.

Risk warning: New market expansion falls short of expectations; regional residents' spending power falls short of expectations; product structure upgrades fall short of expectations; macroeconomic risks, etc.