\u3000\u30 Shenzhen Fountain Corporation(000005) 68 Luzhou Laojiao Co.Ltd(000568) )
Events
In 2021, the annual revenue was 20.642 billion yuan, a year-on-year increase of + 23.96%; The net profit attributable to the parent company was 7.956 billion yuan, a year-on-year increase of + 32.47%, of which 21q4 revenue was 6.532 billion yuan, a year-on-year increase of + 29.26%; The net profit attributable to the parent company was 1.68 billion yuan, a year-on-year increase of + 41.14%. 22q1 revenue was 6.312 billion yuan, a year-on-year increase of + 26.15%; The net profit attributable to parent company was RMB 7.2 billion, with a year-on-year return of RMB 2.8 billion.
Comments
The performance in 21 years is in line with expectations, focusing on dual brand precision marketing
In 2021, the company’s overall performance was in line with expectations, and the profit margin continued to rise. Benefiting from the continuous release of high potential energy of national cellar 1573, the volume and price rise together + the accelerated development of low alcohol liquor with 40% revenue of national cellar + the steady development of medium-grade liquor, the company’s ton price moved up steadily in 2021, while the profit margin maintained steady growth year after year. Specifically:
Product side: brand building and brand polishing. The company firmly focused on “double brands, three lines and large single products”, and the price band layout was relatively uniform (the launch of sub high-end new product Luzhou Laojiao Co.Ltd(000568) 1952 further improved the product matrix). Among them, the revenue of medium and high-end liquor increased by 29.22% to 18.397 billion yuan year-on-year, the proportion of revenue increased by 3.63 percentage points to 89.12% year-on-year, and the sales volume and ton price increased by 25.42% and 3.03% year-on-year respectively: 1) high-end liquor enjoys the expansion bonus, and Guojiao 1573 is expected to achieve the revenue target of 30%; 2) The adjustment of mid-range products is positive (the quantity of 21h1 is controlled and the price is raised, and the quantity of 21h2 is appropriate). In 2021, although the revenue of low-grade liquor decreased by 8.74% year-on-year to RMB 2.018 billion, benefiting from the internal structure adjustment of low-grade liquor products (Dacheng Luzhou flavor company was established in April to operate low-end liquor), while the sales volume (mainly Erqu products) decreased by 51.82%, the ton price increased by 89.42%.
Market side: precision marketing, scale expansion. The company firmly implemented the development requirements of “precision marketing and market expansion”, and made a major breakthrough in the “east to South” strategy. In 2021, although the number of dealers in China decreased year-on-year, the average scale increased by 42.16% year-on-year, indicating that the channel maintained high-quality development;
Financial side: fine management and efficiency improvement. In 2021, the gross profit margin and net profit margin of the company changed by 2.65 and 2.67 percentage points year-on-year to 85.70% and 38.45% respectively. The profitability increased steadily. The main reasons are: 1) structural upgrading; 2) Under the fine operation and management policy, the company achieved continuous improvement of brand strength while reducing the sales expense rate (the sales expense rate of the company decreased by 1.12 percentage points to 17.44%, of which the advertising and promotion expenses were 34.37% and 6.02% year-on-year respectively). Operating cash flow increased by 56.60% over the same period last year to 7.699 billion yuan; Contract liabilities increased by + 1.831 billion yuan to 3.510 billion yuan compared with the same period last year.
2022q1 performance exceeded expectations and the brand potential was released strongly
In 2022q1, the profit growth rate of the company exceeded the expectation. The main reason is that while Guojiao played the leading role of brand, Luzhou Laojiao Co.Ltd(000568) series played the role of the second growth pole: 1) during the Spring Festival this year, Guojiao 1573 maintained an increase of about 25% (the growth rate of low alcohol liquor is expected to exceed 35%), the price system is stable, and the new price system is conducive to further thickening the performance; 2) Benefiting from the expansion of mid-range liquor market, the improvement trend of dynamic sales of mid-range liquor such as cellar age is better; 3) Luzhou Laojiao Co.Ltd(000568) 1952 start to contribute performance increment to the market; 4) The company’s main sales area southwest, North China and East China, the main expansion area, have excellent performance. Affected by the epidemic, there is significant regional differentiation, among which 1573 in North China has excellent performance.
The profit side achieved higher than expected growth and excellent expense performance. The gross profit margin and net profit margin of 2022q1 company changed by 0.39 and 2.24 percentage points to 86.43% and 45.81% respectively compared with the same period last year, of which the sales expense rate and management expense rate changed by – 2.82 and 0.61 percentage points to 10.66% and 4.84% respectively compared with the same period last year. The increase of management expense was mainly due to the increase of the cost of restricted stock incentive plan; Operating cash flow changed by – 13.63% over the same period last year to 1.131 billion yuan; Contract liabilities increased by + 71 million yuan to 1.763 billion yuan compared with the same period last year.
Outlook: 22q2 is expected to continue high growth, both volume and price rise, superimposed with the acceleration of nationalization, and the net interest rate is expected to continue to improve
In the short term, the price of gaoguojiao is very smooth under the background of “from follow to accompany”. The company takes many measures to develop low alcohol wine, and the performance of 22q2 may continue the trend of high growth under the low base; In the medium and long term, the company strives to achieve a year-on-year growth of revenue of no less than 15% in 2022, and puts forward such goals as “we must establish higher goals, sales must maintain a high-speed growth trend, sprint bravely, jump to the top, and we must achieve large-scale growth”, “form an offensive trend of national development and all kinds of markets going hand in hand”, “focus on promoting equity incentive and the implementation of medium and long-term incentive plans on schedule”. We expect that in 22 years, with the continuous high-speed growth of Guojiao and the accelerated reform of medium and low-grade liquor, the scale effect may further push up the net interest rate.
Profit forecast and valuation
It is estimated that the revenue growth rate of the company from 2022 to 2024 will be 22.5%, 21.9% and 20.0% respectively; The growth rate of net profit was 27.8%, 26.0% and 24.79% respectively; EPS is 6.9, 8.7 and 10.9 yuan / share respectively; PE was 32, 26 and 21 times respectively, maintaining the buy rating.
Catalyst: the demand for Baijiu recovered more than expected, and the rating continued to rise.
Risk tips: 1. The impact of the overseas epidemic has led to a second outbreak or upgraded prevention and control in China, affecting the overall dynamic sales recovery of Baijiu; 2. The rise of Guojiao’s wholesale price was lower than expected.
