H1/Q2's alcohol revenue increased by 15.6%/22.0% respectively, exceeding expectations. Structurally, the growth rate of ordinary wine was faster. Sales of large single products of Qingyu were in line with the annual plan, and Q2 profit margins declined due to increased dealer rebates and e-commerce platform expenses. Looking ahead to the whole year, it is expected that the target of 12% increase in alcohol revenue will be successfully achieved. On the profit side, considering the impact of additional depreciation on the cost in the second half of the year after the transformation of the rice wine industrial park, profit margins (after deduction of compensation) are expected to decline. The 24-25 EPS forecast was slightly lowered to 0.50 or 0.24 yuan. If compensation is not taken into account, corresponding to the 24-year PE of about 38X, maintaining the “gain” rating.

24Q2 revenue/net profit to mother were +16.7%/+5.4%, respectively. 24H1 achieved revenue/net profit attributable to mothers/net profit excluding non-attributable net profit of 0.89/0.095/0.092 billion, +12.83%/+5.36%/+4.78% year-on-year. Among them, 24Q2 achieved revenue/net profit attributable to mothers/net profit net profit without return to mother of 0.322/0.033/0.031 billion, +16.69%/+3.76% year-on-year. Revenue growth exceeded expectations, and profit performance was in line with expectations. 24H1's cash payback was 0.777 billion, up 9.63% year over year.

Alcohol revenue is accelerating, and Qingyu's progress is in line with the annual plan. The company's rice wine revenue grew at an accelerated pace. 24H1/Q2 alcohol revenue increased 15.6%/22.0% respectively. On the one hand, the company benefited from increased dealer rebates and discounts, and on the other hand, the local government increased its support for the rice wine industry. By product, the revenue of high-end liquor/regular alcohol in H1 was 0.62/0.251 billion, up 14.2%/19.2% year on year, while in Q2 medium and high grade liquor/regular alcohol increased 22.4%/21.0% year on year. In the first half of the year, sales of core high-end products in the “National Brewing” and “Blue and White Liquor” series increased by 42.4% year-on-year, and Qingyu completed about half of its tasks in the first half of the year. By region, Shanghai/Zhejiang/Jiangsu/other regions were +42.5%/+25.2%/+9.1%/+12.5% year-on-year in Q2. The number of company dealers at the end of the reporting period was 1,911, a decrease of 6 compared with the beginning of the period, including +5/+14/-7/-22/+4 in Shanghai/Zhejiang/Jiangsu/Others/International regions respectively.

Net interest rate declined year-on-year in Q2 due to increased rebates and cost investment. The company's 24Q2 gross margin was -0.52 pct to 38.08% year on year, mainly due to increased dealer discounts and rebates, and sales expense ratio/management fee ratio/financial expense ratio+0.61/-0.95/-0.06pct to 14.77%/7.72%/-3.96%, mainly due to increased e-commerce platform fees. The H1 e-commerce platform cost 34.31 million yuan, an increase of 65.6% year over year. Credit asset impairment losses increased in Q2, but the actual tax rate declined. The company achieved a net interest rate of 10.16% to mother in Q2, a year-on-year decrease of 1.09 pcts.

Investment advice: The annual alcohol revenue target is expected to be achieved. Profits are dragged down by expenses and depreciation, and the “gain” rating is maintained. The company is vigorously promoting the “More Drinking World” campaign, implementing the 10 million themed marketing campaign plan. Since this year, the channel policy has been increased, and the Q2 alcohol revenue growth has accelerated. It is expected that the target of 12% increase in alcohol revenue for the whole year will be successfully achieved. Structurally, although sales of H1 Qingyu are in line with the plan, the overall growth rate of medium to high-end wine is slower than that of ordinary wine, and high-end wine still needs to be strengthened. On the profit side, rebates and cost investment have increased this year. At the same time, considering the impact of additional depreciation on costs in the second half of the year after the transformation of the rice wine industrial park, profit margins (after deduction of compensation) are expected to decline. The 24-25 EPS forecast was slightly lowered to 0.50 or 0.24 yuan. If compensation is not taken into account, corresponding to the 24-year PE of about 38X, maintaining the “increase in holdings” rating.

Risk warning: New product expansion falls short of expectations, phased intensification of industry competition, peripheral market expansion falls short of expectations, etc.