On July 9, 2024, Alcoholic Liquor announced the 2024 semi-annual results forecast.

Key points of investment

Performance fell short of expectations, and overall performance was under pressure

According to the announcement, 2024H1 expects to achieve revenue of around 1 billion yuan, a year-on-year decrease of 35.12%; achieve net profit of 0.11-0.13 billion yuan, a year-on-year decrease of 73.93%-69.91%; achieve net profit deducted from non-mother 0.11-0.13 billion yuan, a year-on-year decrease of 73.59%-68.79%; and a net profit margin of 11.00%, or 16.37pcts year-on-year. Among them, 2024Q2 is expected to achieve revenue of 0.506 billion yuan, a year-on-year decrease of 12.26%; realized net profit of 0.037-0.057 billion yuan, a year-on-year decrease of 69.92%-53.50%; realized net profit deducted from mother 0.04-0.06 billion yuan, a year-on-year decrease of 65.57%-48.57%; and a net profit margin of 7.24%, a year-on-year decrease of -13.87pcts.

Fee reform continues to advance, and marketing performance is gradually improving

The company's revenue improved month-on-month in the second quarter, but overall gross margin declined due to the relatively high share of high-end and mass price products such as red and domestic products within the province, and transparent clothing and domestic products from outside the province, and the product structure declined. Also, in the second quarter, the company accelerated sales and consumer development, pre-invested sales expenses, and the sales expense ratio increased, so profits declined significantly. Through the company's continuous fee reform, terminal sales data, such as the number of banquets and the number of code scans by consumers, improved dramatically over the same period last year, driving a gradual increase in dealers' willingness to repay payments. At the same time, it is strengthening the focus on model market construction. By the end of June, the company had launched 11 model markets, and it is expected that markets inside and outside the province will focus on strength.

Profit forecasting

We are optimistic that the company will continue to push forward cost reforms, putting pressure on short-term performance in exchange for long-term growth. Domestic pricing has shown a strong high-end brand power, and the acceleration of Hongtan Marketing will reflect an increase in the influence of the next high-end. According to the semi-annual report forecast, we slightly adjusted the company's 2024-2026 EPS to 1.27/1.54/1.89 yuan (previous value was 1.50/1.83/2.25 yuan), respectively. The current stock price corresponds to PE 31/25/21 times, respectively, to maintain a “buy” investment rating.

Risk warning

Downward macroeconomic risks, domestic revenue growth falling short of expectations, expansion outside the province falling short of expectations, and the volume of Red Tan falling short of expectations.