On April 29, 2024, Golden Seed Liquor released the first quarter results reports for 2023 and 2024.
Key points of investment
Taking advantage of China Resources channels, low-end liquor is growing rapidly
The company achieved revenue of 1,469 billion yuan in 2023, up 23.92% year on year, net profit of -0.22 million yuan, and -187 million yuan for the same period in '22; of these, high-end wine achieved revenue of 0.53 billion yuan, mid-range liquor 230 million yuan (same decrease of 23.21%), and low-end wine of 699 million yuan (same increase of 81.51%). Net profit not attributable to mother was -$57 million, compared to -$206 million for the same period in '22. 2023Q4 revenue was 396 million yuan, up 6.80% year on year. Net profit attributable to mother was 13 million yuan, -51 million yuan for the same period in 2022, net profit after deducting non-return to mother was -209 million yuan, and -52 billion yuan for the same period in 2022.
Profit for the first quarter of 2024 reversed the same and month-on-month losses. The company steadily improved its operations and achieved revenue of 419 million yuan in 2024Q1 (same decrease of 3%), net profit attributable to mother of 0.18 million yuan (-41 million yuan in Q1 in 2023), and net profit after deducting non-return to mother of 15 million yuan (-43 million yuan in Q1 in 2023), turning a year-on-year loss into a profit.
The company still has significant influence advantages in brands such as the Mid- and Low-end Price Band Medium Soft Series and Seed Vintages; at the same time, it has launched the Fuhexiang series for the high-end price range. Currently, it is still in the brand development stage, and it is expected that China Resources will use China Resources channels to expand steadily in the future.
Profit forecasting
After entering China Resources, China Resources made positive changes and adjustments to the company's management, channels, and product systems. In the short term, there was some friction at the management level, and brand cultivation still needed time to accumulate; in the long run, China Resources's market-based assessment mechanism was improved and the management team had strong learning and correction capabilities, and the overall development direction was positive. We are still optimistic that China Resources's entry will boost the company's strength. We expect the company to reverse losses in 2024. We expect the company's EPS in 2024-2026 to be 0.08/0.47/0.92 yuan, respectively. The current stock price corresponds to the 2025-2026 PE is 34/17 times, maintaining a “buy” investment rating.
Risk warning
Downside macroeconomic risks, China Resources's empowerment situation falls short of expectations, and the pace of channel development and brand cultivation falls short of expectations.