Shede Spirits Co.Ltd(600702) (600702)
The third quarterly report maintained high growth, and the reservoir ensured the annual performance
The company’s 2021q1-q3 revenue was 3.607 billion yuan, an increase of 105% at the same time; The net profit attributable to the parent company was 970 million yuan, an increase of 212% at the same time, and continued to maintain a high growth. In the first three quarters, the revenue still maintained a high growth (154% in Q1, 119% in Q2 and 65% in Q3), and the net profit attributable to the parent company still maintained an increase of more than 60% (Q1 increased by 1031%, Q2 increased by 215% and Q3 increased by 60%). At the end of 2021q1-q3, the contract liabilities were 852 million yuan, the reservoir effect was obvious, and the annual performance was unlikely to be completed. The company was affected by the product structure in the first three quarters, but the gross profit margin was always more than 76.5%, the net profit margin in 2021q3 decreased to 20% due to the impact of the expense side, and the annual net profit margin is expected to be more than 27%.
With the concerted efforts of two brands, the strategic effect of old wine has begun to show
The company’s 2021q1-q3 medium and high-grade liquor revenue was 2.834 billion yuan, an increase of 111%, and the low-grade liquor revenue was 480 million yuan, an increase of 268%. Among them, the revenue of medium and high-grade liquor in 2021q3 was 960 million yuan, an increase of 63% at the same time; The revenue of low-grade liquor was 160 million yuan, an increase of 354%. In 2021, Tuopai ushered in restorative growth and explosive growth brought about by customized development business. Willing to focus on combing the price system and channel expansion, the business division made concerted efforts with dual brands. It has been more than 2 years since the old wine strategy was put forward. At present, the effect is beginning to show. We expect the sales of the old wine division to be about 400 million yuan this year. The old wine strategy continues to cultivate consumer groups. It is expected to usher in high growth in the next 3-5 years, and the sales of the old wine division is expected to exceed 2 billion yuan in the future. In addition, the company recently issued a notice on increasing the ex factory price of taste shede (Collection) and wisdom shede (Collection), and the price increase will be implemented from January 1, 2022. This price increase is also a high promotion of shede brand, improves the market awareness of the company’s old wine products, and also contributes to the company’s performance next year.
Prove yourself in 2021 and make great strides in 2022
In 2021, the company has proved that two problems criticized by the market in the past have been solved: first, the goal is too high to be completed, but the company is in no danger of completing the annual task this year and is ready to make a good start next year; Second, the channel fees can not be fully realized, but this problem has also been properly solved this year.
We look at the company from three dimensions: short, medium and long term:
In the short term, the company has been on the right track, and the management and dealers are full of confidence; In December, dealers actively make money and prepare goods for the Spring Festival of the next year, and the Spring Festival of 2022 has a good start;
In the medium term, the company has proved its ability to achieve the set goals. Next year, the company will continue to strengthen brand publicity, hold high and fight high, increase regional expansion, sink advantageous regional channels, and the investment quality is expected to be optimized;
In the long run, the differentiated competition brought by the company’s old wine strategy has attracted great attention from the market, the cultivation of channel consumers has been carried out, and it will take time to form a deep understanding; In addition, Fosun has basically solved the problems left over by Shede Spirits Co.Ltd(600702) history and promoted the company to establish an incentive mechanism, With “1 Tour” (integrated into the Fosun trip) + “1 Platform” (the docking platform between the dealer and Fosun system) + “n product” (the exclusive version of Fosun ecological characteristic products, services and rights and interests) as the core system, Fosun creates a deeply empowered ecosystem for dealers; finally, Fosun develops and implements the Fosun system ecology to jointly create products and broaden the sales channels of ecological BD.
The whole company will make steady progress in accordance with the established rhythm and make a good start next year. We reiterate that we are optimistic about the company’s logic: 1) on the product side, the company focuses on the old wine strategy, adheres to the dual brand strategy of shede and Tuopai, and focuses on building strategic single products such as taste shede and wisdom shede. 2) On the channel side, restore old customers in the old market, develop new customers in new markets, and focus on building key markets and customers. 3) In terms of circle marketing, the company focuses on famous wine, enters famous enterprises and smart clubs, accurately targets the circle, penetrates the head + waist + legs, and focuses on the core target customers. 4) Fosun has been in charge of the company for nearly a year. It is expected to accelerate the subsequent empowerment and promote the company to enter a new stage.
Profit forecast
Under the expansion of secondary high-end capacity, the company enjoys dividends. We are optimistic about the differentiated competitive advantage brought by the company’s old wine strategy and the acceleration of enabling the company after Fosun takes the lead. It is estimated that the EPS from 2021 to 2023 will be 3.94/6.01/7.91 yuan, and the current share price corresponding to PE will be 61 / 40 / 30 times respectively. It is covered for the first time and given a “recommended” investment rating.
Risk statement
Macroeconomic downside risk, epidemic drag on consumption, unwilling growth rate is lower than expected, the promotion of old wine strategy is blocked, the expansion outside the province is lower than expected, and the synergy between Fosun and the company is lower than expected.
