Revenue grew by double digits in 2023, and the cost side continued to optimize downward. In 2023, as demand differentiates and recovers, Wuliangye grasped the recovery opportunities of the banquet scene. By increasing efforts to cultivate 1618 and low-level Wuliangye consumers, Wuliangye achieved more than double digit growth throughout the year. In 2023, the main brand revenue was +13.5% (sales volume +18.0% year over year, tonnage price -3.8%). It is expected that 1618, a low-grade Wuliangye contribution will increase significantly, reducing the overall product structure in stages. Revenue from the 2023 wine series was +11.6% year over year (sales +28% year over year, tonnage price -13%). It is expected that Wuliangchun and others will increase the cost of the banquet to remove inventory, and will be adjusted or nearing the end of 2023.
In terms of gross margin, the overall gross margin in 2023 is +0.4 pct. It is expected that alcohol's share of revenue will increase and the cost side will be greatly optimized. Detailed analysis revealed that in 2023, the cost per ton of alcohol fell by 9.7 pcts, the cost of a ton of raw materials fell by 10%, and the cost of personnel per ton fell by 15%. It is expected that there is room for continuous optimization on the cost side in the future. The tax and surcharge rate is +0.5pct year-on-year, which is expected to be due to an increase in the share of alcohol revenue and production errors. The cost side was basically flat. The sales expense ratio was +0.1 pct year over year, and the management expense ratio was -0.2 pct year over year.
On the profit side, the net margin was +0.2pct year-on-year, mainly due to lean optimization on the cost side.
2024Q1 has had a solid start to operations and continues to anchor double digits throughout the year. 2024Q1 revenue increased by 11.9%, and is expected to grow significantly at a low rate of 1618, to seize the share of competitors during the peak season of the Spring Festival. Looking at gross margin, overall gross margin remained flat in 2024Q1, and it is expected to contribute to cost-side optimization. On the cost side, the 2024Q1 sales expense ratio was +0.8 pct year over year, due to the company's additional banquet and C-side expenses; the management expense ratio was 0.5 pct year over year, contributing to refined internal management and scale effects. On the profit side, the 2024Q1 net interest rate was -0.1 pct year over year, which is in line with the phased characteristics of “volume before price, sale out of inventory” during the peak season, so there is no need to worry too much.
Fluctuations in operating cash flow were disrupted by repayment methods, and the dividend rate increased to 60% in 2023. The contract debt balance at the end of 2024Q1 was 5.05 billion yuan, down 8.8% year on year. It is expected to ease the pressure on dealers' cash and increase the bill repayment ratio appropriately. 2024Q1's revenue was -24% year over year, and net operating cash flow was -95% year over year, which is expected to increase the share of accepted drafts. In 2023, the company's dividend ratio increased to 60%, an increase of 5 pcts.
Product diversification and channel flattening continue to advance, awaiting the release of reform dividends. In 2023, 26,000 new core terminals were added to traditional channels, and the number of specialty stores exceeded 1,600. Emerging channels broke through the circle at an accelerated pace. In 2024, the company will continue to advance in channel flattening and diversification to ease the pressure on traditional channels. In 2023, the company launched a new purple spirit and completed the development and sale of 18 cultural wines. It is expected that in 2024, it will continue to explore the systematic operation of non-standard wines to share the growth pressure of the five main products.
Risk warning: demand recovery falls short of expectations; reforms fall short of expectations; increased competition, etc.
Investment advice: Maintaining the previous profit forecast and introducing 2026, the company is expected to achieve operating income of 926.65/1019.41/1116.25 billion yuan in 2024-2026, +11.3%/10.0%/9.5% YoY; realized net profit to mother of 338.21/376.09/415.10 billion yuan, +12.0%/11.2%/10.4% YoY; corresponding PE is 17.5/15.7/14.2X, maintaining a “buy” rating.