Incident: On May 17, 2024, Fenjiu, Shanxi held the 2023 Annual General Meeting of Shareholders. At the meeting, the company gave a full introduction to the company's business situation, future strategy and development goals in 2023, which strengthened investor confidence. The summary feedback is as follows:
Product side: Continuously improve the product structure, and the three brands develop in multiple categories collaboratively. The company adheres to the collaborative development of the three major brands: Fenjiu, Zhuye Qingjiu, and Xinghuacun Liquor. The product line covers multiple price ranges, and with the diversification of consumer demand, the advantages continue to expand. Among them, the Blue and White series accounted for 46% in 23 years, and Blue and Glass Fen became the company's two major strategic weapons. In the future, the company will re-express the blue and white series represented by blue 30 by creating the value of rich products, and then thinking about ways to solidify and improve among consumers, by separating the categories and packaging of green 20 and blue 30. At the same time, seizing the advantages of the multi-category matrix, the company will convene a deployment meeting between national distributors Laobaifen and Panama in June to launch new Laobaifen products, focusing on boosting the banquet market. A professional steering group is planned to be set up in the second half of the year. It is expected that Laobaifen and Panama will be the products with the highest growth rate in 2024.
Channel side: Optimize market layout and accelerate channel layout. The company deepens marketing reforms, consolidates the market foundation, accelerates channel expansion, and constructs a brilliant domestic and international market pattern. The domestic market is intensively cultivated, and targets are adjusted according to environmental and scientific data to ensure healthy and stable development. Among them, the provincial market is already quite mature. The plan is to appropriately reduce the growth rate within the province and focus on structural upgrading; the 1 billion yuan market outside the province continues to increase, and the core market south of the Yangtze River has increased by more than 30% year on year. This year's development priorities are: 1) markets with better terminal and team cultivation; 2) provinces with better local economic development; 3) markets with advantages in some categories, and the nationalization process is further expanding. Expand the international market, thoroughly implement the “34595” international development strategy, make high-frequency appearances at high-standard international exhibitions, and tell the story of Chinese liquor in an international language. In terms of e-commerce sales, during the “Double Eleven” period, the sales volume of official flagship stores of major e-commerce platforms steadily ranked in the top three in the industry, achieving the highest live streaming sales volume for liquor brands on the Douyin platform. In the future, the company will take the initiative to improve the quantity and quality of consumption channels and open up room for development.
Future marketing plans and goals: cultivate brand development advantages and upgrade high-quality development strategies. In 2023, the company spread Fenjiu's voice through integrated media matrices, significantly increasing the frequency of interaction with consumers. Increase brand exposure through high platforms and high density, successfully host various events, and continue to improve and strengthen the brand IP. In the future, the company will further step up scientific marketing efforts, focus on the four major advantages of categories, product lines, scenarios, and reforms, make efforts in cultural development and management systems, scientifically formulate policies, and promote the implementation of marketing activities. Specific marketing plans include: optimizing the cooperative ecosystem, communicating with the times, enhancing brand activity ideas, and ultimately implementing them to the target audience on the channel side. Guided by the business policy of “gathering potential energy, marketing breakthroughs and efficiency; cultural leadership, brand upgrading to promote development; increasing production capacity, building a strong foundation and improving quality; upgrading management, empowering cohesion with numerical intelligence”, the company scientifically and rationally determined the main indicators for 2024 and strived to increase revenue by about 20% over the previous year. It will also continue to formulate a continuous and stable dividend policy to ensure shareholders' interests and share development results with investors.
Profit forecast and investment suggestions: Optimistic that the company will continue to improve the product matrix, accelerate channel layout, and continue to cultivate the consumer base, thereby driving the revival of fragrance potential. We expect to achieve revenue of 386.33/463.60/551.69 billion yuan in 24-26, net profit of 13.4.65/165.84/20.84 billion yuan, corresponding to a PE value of 23.90/19.40/16.02x, and maintain a highly recommended rating.
Risk warning: risk of macroeconomic growth falling short of expectations; risk of increased industry competition; risk of food safety.