The company released its three-quarter report for 2024. In the first three quarters, it achieved operating income of 24.3 billion yuan, +10.8% year-on-year; realized net profit to mother of 11.59 billion yuan, +9.7% year-on-year. Looking at the third quarter of a single quarter, the company achieved operating income of 7.4 billion yuan (+0.7%), achieved net profit of 3.57 billion yuan (+2.6%), and realized net profit of 3.57 billion yuan (yoy +3.5%) after deduction of non-return to mother.

The sentiment of the industry is declining, and the growth rate of performance is slowing down. The company's Q3 performance growth rate is expected to slow down mainly due to: 1) the decline in industry sentiment, the frequency of liquor banquets or a decline in consumption power; 2) Guojiao's sales volume is expected to drop slightly during the double season; 2) the high-end price band is greatly affected by the downturn in the industry. It is expected that specialty and cellar age will also be unavoidable. The revenue growth rate is expected to decline to a certain extent, but it is expected that the 60 edition of the specialty will continue to grow faster than average. 3) The product price market has loosened to a certain extent. For example, Guojiao's wholesale price has declined slightly since the beginning of the year. At the end of 24Q3, the company's contract liabilities were 2.65 billion yuan, -10% year-on-year, +13% month-on-month, and quarterly revenue+contract liabilities changed to 7.7 billion yuan (yoy -8%).

Cost control has been strengthened, and net interest rates have been rising steadily. In the first three quarters of 2024, the company's gross margin was 88.4% (yoy+0.0pct); the sales/management expenses ratio was 10.3%/3.2%, -0.7pct/-0.7pct, respectively; the net sales margin was 47.8% (yoy-0.6pct). In 24Q3, the company's gross margin was 88.1% (yoy-0.5pct), which is expected due to declining product structure; sales/management expense ratios were -1.1 pct/-0.6 pct, respectively. The company is expected to strengthen cost control; and the net sales margin is 48.1% (yoy+0.8pct).

Decelerate, stabilize prices and develop healthily, and wait for the industry to recover. The company's diversified product matrix layout is perfect, effectively improving performance resilience and reducing the risk of industry fluctuations. Achieving the 15% revenue target for the whole year is difficult, but the decline in the company's performance also means reducing channel pressure, which is conducive to the healthy operation of the channel system, stable price market, and retaining strength to prepare for the next round of liquor cycles. Currently, favorable macroeconomic policies are being introduced frequently, which are conducive to speeding up economic recovery, and liquor sales are expected to benefit from a recovery.

According to the three-quarter report, revenue and gross profit margin were lowered for 24-26 years. We forecast the company's earnings per share for 2024-2026 to be 9.74, 11.70, and 13.76 yuan, respectively (the original forecast was 10.22, 12.28, and 14.43 yuan). Combined with comparable companies, we believe that the current reasonable valuation level of the company is 19 times the price-earnings ratio of 2024, and the corresponding target price is 185.06 yuan, maintaining the purchase rating.

Risk warning

Consumption upgrades fall short of expectations, Guojiao sales fall short of expectations, and the risk of food safety incidents.