Incident Overview

In November 2024, the company held an investor exchange event to discuss the 25-year business plan, the company's strategic direction, product strategy, regional market strategy, fundamental situation and channel construction.

Analytical judgment:

It is expected to improve month-on-month from Q4 to 25Q1. The year-on-year growth rate is expected to slow down in '25, and setting goals is both pragmatic and enterprising.

According to the company's investor exchange records, since Q3 this year, pressure on the external macro environment has further increased, and the overall growth rate of the liquor industry has declined. Against this background, the country introduced a package of economic stabilization policies. We expect subsequent consumption to gradually stabilize with the macroeconomic environment. According to the investor exchange records, the company is expected to improve month-on-month from Q4 to 25Q1, but the year-on-year pressure is still under pressure.

According to the wine industry, entering the second half of 2024, the deceleration of the liquor industry will become a normal trend. According to the investor exchange records, the company has begun market research since Q4, and will focus on the changing situation in the industry, combine its own development status, and set goals that are both aggressive and feasible. We expect that the company's 25-year growth rate will also slow down with the general trend of the industry, and no longer compare numbers. However, the goal and momentum of maintaining progress and insisting on intensive cultivation and climbing to the top in the province will not waver. Instead, enterprises are more able to achieve A breakthrough.

Strengthen the four-stage siphon effect and expand the volume to both ends. Next year, the V series will focus on the V3 to take the lead.

According to the investor exchange records, the 300-500 yuan price band companies in the province already have a leading advantage. This year's advantage is even more obvious, but the higher the price band, the lower the company's share. Based on this current situation, the company's strategy for next year will focus on stabilizing the Sikai basic market, while further exploiting its siphon effect, intercepting and accepting demand at similar prices, continuing to strengthen the Sikai's large single product effect, and consolidating the company's advantage in the 300-500 yuan price range. Furthermore, it has expanded from four openings to both ends, and the elegant, single, and V3 are all seeking further expansion.

The phased goal of using brand potential to drive volume downward is easier to achieve, but upgrading upward still requires the company to focus enough and maintain resource investment.

According to the investor exchange records, the company clearly recognizes that the upward structural improvement is an important source for the company to continue to climb to the top and increase its share in the province in the future. Focusing on the high-end strategy, the company has now deployed a variety of products, including V series, Liukai, 2049, etc., with a large number of product layouts. We believe that resources are still not strong enough when distributed to individual products. In response to this, the V series will focus more on the pioneering scale of the V3 in '25, emphasize pertinence in terms of price strategy, terminal construction, and consumer cultivation. Targeted consumer cultivation activities remain active and innovative, and V6 will continue to cultivate at a price.

The style of play outside the province is basically clear, and they are determined to seek nationalization at the next level.

According to the investor exchange records, in recent years, the company has been committed to the expansion of the four surrounding provinces of Jiangsu in Shandong, Anhui, Henan and Zhejiang, and its growth rate and volume are leading in the overall structure outside the province. The results and significance of the market size in the surrounding sector are obvious. Market trends in Heze, Linyi in Shandong, Jiaxing and Huzhou in Zhejiang, Chuzhou, Wuhu, Xuancheng, and Hefei in Anhui have performed well. Currently, the direction, path, model system, etc. of expansion outside the province have been basically verified. In the future, as organizational coordination keeps up in time, the road outside the province is expected to get wider and wider.

In terms of product layout, after several years of exploration and adjustment, the company determined that the outside of the province should commit to cultivating quadrilaterals as an integrated approach, and not move product prices down because consumption power outside the province is lower than within the province and the consumer environment is declining to avoid damaging brand price perceptions. We also believe that due to considerations of the medium- to long-term nationalization layout, the company hopes to use four core products to seek nationalization. The strategic goals are far-reaching, and sales volume in the short to medium to short term will be more stable and stable.

Investment advice

The Spring Festival is the most rigid peak season for liquor in the middle of the year. It is also a key point for wine companies to complete sales and promote sales. We expect demand for business banquets, corporate meetings, family and friend gifts to be resilient. Then, after the Spring Festival, industry sales will improve month-on-month compared to the second half of '24, and the company's fundamentals and performance are also expected to improve month-on-month.

Looking at the short to medium term, in order to seize the peak period of intensive cultivation in the province, increasing market share and expanding market coverage is relatively more important for companies. We believe that under the trend of intensifying competition in the industry, the possibility that the company will maintain its current level of investment or even increase its investment in a targeted manner is not ruled out, so it is relatively cautious in estimating profit flexibility. Currently, the industry has entered a period of deceleration and the company's goals will be more pragmatic. However, the company's own advantages continue to accumulate, and it is expected to outperform the industry. After comprehensive consideration, we lowered our profit forecast slightly. Our operating income for 24-26 was lowered from 11.8/13.2/14.6 billion yuan to 11.8/13/14.2 billion yuan, net profit due to mother was lowered from 3.6/4/4.6 billion yuan to 3.6/4/4.4 billion yuan, and EPS from 2.86/3.23/3.67 yuan Reduced to 2.86/3.15/3.48 yuan. The closing price on December 10, 2024 was 49.66 yuan, corresponding to 24-26 PE being 17x/16x/14x respectively, maintaining a “buy” rating.

Risk Alerts

Economic recovery fell short of expectations, competition within the province intensified, demand for banquets continued to shrink, and the high-end and nationalization process fell short of expectations