Description of the event

Incident: The company released its 2024 semi-annual report, achieving total revenue of 83.451 billion yuan, up 17.56% year on year, and net profit to mother of 41.696 billion yuan, up 15.88% year on year. Among them, 24Q2 achieved total operating income of 36.966 billion yuan, up 16.95% year on year, and net profit of 17.63 billion yuan year on year, up 16.10% year on year.

At the same time, the company issued a cash dividend return plan announcement. In 2024-2026, the total amount of cash dividends distributed by the company each year will not be less than 75% of the net profit realized to the mother in that year, and the annual cash dividend will be implemented twice (annual and mid-term dividends).

Incident reviews

The 24Q2 series achieved high growth and rebounded steadily after flying prices fluctuated. The company 24H1 achieved total revenue of 83.451 billion yuan, an increase of 17.56% over the previous year. 1) In terms of products, 24H1 Maotai achieved revenue of 68.567 billion yuan, a year-on-year increase of 15.67%; among them, 24Q2 Maotai achieved revenue of 13.147 billion yuan, an increase of 30.51%; of these, 24Q2 Maotai achieved revenue of 28.86 billion yuan, an increase of 12.92%; and serial wine achieved revenue of 7.211 billion yuan, a year-on-year increase of 42.52%. 2) In terms of sales channels, 24H1 wholesale channel revenue was 47.986 billion yuan, accounting for 58.7% of alcohol revenue and 33.728 billion yuan of direct sales revenue, accounting for 41.3%. iMaotai achieved revenue of 4.907 billion yuan in 24Q2, an increase of 10.6% year over year. The second quarter is the traditional low season for the liquor industry. Consumer demand for gifts and high-end banquets will decline from month to month compared to the peak Spring Festival season. Against this backdrop, the company's wine series has increased. At the same time, the early price market fluctuated in the short term due to demand pressure and uncontrolled scalper prices. According to today's wine price data, the bulk price of Flying Sky fell to 2,080 yuan/bottle in mid-late June this year. The price stabilization measures such as canceling the unpacking policy of large boxes of Maotai and suspending delivery of some boutique Maotai were accurate and effective. The current product price has steadily rebounded to around 2,400 yuan/bottle. In the first half of the year, the company balanced volume and price by strengthening channel control and accurate marketing, and successfully completed its mission goals. The company's performance was highly deterministic, demonstrating its leading value.

24H1 gross margin declined slightly, and profitability was relatively stable. The company's 24H1 gross margin and net margin were -0.05/-0.72pcts to 91.91%/49.96% respectively, 24Q2 gross margin and net margin -0.14/ -0.35pcts to 90.88%/47.69%, respectively. The slight decline in 24Q2 gross margin was mainly due to high growth in wine series, and overall profitability was stable. In the first half of the year, the company's sales expense ratio and management expense ratio were +0.62/-0.80pcts to 3.14%/4.60%, respectively. The increase in sales expenses was mainly due to the company's increased advertising and market investment. The final contract debt of 24Q2 was 9.99 billion yuan, +26.6/+0.47 billion yuan year-on-year, and the reservoir is still sufficient.

It aims for long-term healthy development, and the medium- to long-term allocation value is highlighted. Facing short-term market fluctuations since June, the company has responded by controlling product supply and improving the marketing structure, reflecting its sensitivity to market response and long-term considerations of brand value protection, with the aim of more “stable and healthy” sustainable development. In the long run, it will not only help stabilize consumers' and investors' confidence and expectations about Maotai's pricing, but will also strengthen the company's leading position in the high-end liquor market. At the same time, the increase in conventional dividend rates has also boosted market confidence and protected its long-term allocation value.

Investment advice

We are optimistic about the long-term investment value of the company. The company's total revenue for 2024-2026 is expected to be 173.843/196.988/223.268 billion yuan, respectively, up 15.5%/13.3%; net profit to mother is 87.04/99.232/112.833 billion yuan, up 16.5%/14.0%/13.7% year over year; corresponding EPS is 69.29/78.99/89.82 yuan respectively; corresponding to current stock prices, PE is 21\ 18\ 16, respectively, to maintain “buying” -A” investment rating.

Risk warning

The pace of macroeconomic recovery has slowed, performance growth has fallen short of expectations, reforms have fallen short of expectations, industry competition has intensified, etc.