\u3000\u3000 Shede Spirits Co.Ltd(600702) (600702)
Management changes, ancient wine is new: the company has the gene of “Chinese famous wine”, but unfortunately missed the golden decade due to the failure of high-end. In 2016-20, Tianyang once limited the development potential of the company due to the “one size fits all” of Tuopai customization business, lax price control, capital embezzlement and other problems. Fosun took over Tianyang in 2021. The original management was willing to return and revitalize channel confidence. The company used information technology to strictly control the price, recover the lost excellent and large businesses, reasonably set incentive and assessment objectives, and was willing to be ready to accelerate the process of nationalization.
The second high-end liquor continued to expand capacity and pay attention to fine operation: (1) in 2020, the income of Baijiu Baijiu /300-600 yuan /600+ yuan was 3538/754/1508 billion yuan in 2020, and CAGR in -4%/26%/22% was 2018-20 years, and the growth rate of second high-end was the strongest. (2) with the upgrading of consumption and the optimization of supply and demand pattern of Baijiu, the supply price of Wuliangye Yibin Co.Ltd(000858) and the national cellar will be increased. The price ceiling will be further opened. The price of Jiannanchun, Sichuan Swellfun Co.Ltd(600779) and sacrifice will be raised in succession. (3) Compared with the high-end pattern, the secondary high-end liquor enterprises are scattered and highly competitive. The liquor enterprises with large brand potential and refined operation of channels and costs are expected to outperform the industry.
Double brands promote sub high-end, flattening + big business recall and release channel thrust: Products: the company firmly adheres to the dual brand strategy of “shede + Tuopai”. Shede series focuses on taste and shede, positioning the price band of 400-500 yuan and moving steadily upward; Tuopai series is mainly from the 1980s to 1990s, positioning the price band of 300-400 yuan. The subsequent launch of liuliang will focus on the light bottle wine of 100 yuan high-speed line, and make efforts to provide increment in the traditional advantageous market. Channel: pay more attention to big and excellent businesses. At the same time, under the mode of “platform operator + alliance”, the company’s channel is gradually flattened and refined. Thanks to the deep binding with dealers, the channel thrust is stronger than the traditional distribution mode. Among the six core regions, East / South China is growing rapidly. Compared with competing products, it is willing to nationalize the layout earlier, and the market outside the province accounts for a relatively high proportion (76% of the income outside the province in 2020, Jiugui Liquor Co.Ltd(000799) , Yanghe, Fenjiu, Anhui Gujing Distillery Company Limited(000596) and so on are only 30% – 60%).
Fosun’s empowerment and dual brand & old wine strategy are at the right time: Fosun is willing to re sort out the management structure, price management and brand operation: (1) management – willing is an important module for Fosun’s layout of the wine industry, which is highly valued. At the same time, establish the “3 + 6 + 4” old wine marketing strategy, strictly control the price, prevent fleeing goods, improve inventory pressure and restore customized products. (2) Brand – the market scale of old wine in 2020 was 80.2 billion yuan, and the CAGR in 2016-20 was 40%. The market potential is large and the consumer group is sufficient. Willing to hoard 120000 tons of high-quality old wine, it has inherent advantages. (3) Marketing – storage time identification, double year identification and dynamic wine age, strengthen the image of willing old wine and cultivate consumers’ concept of old wine. In addition, from program marketing to entering the enterprise, we are willing to have constant highlights of marketing.
Profit forecast, valuation and rating: we are optimistic about the combination of “high-quality management + high-quality assets” and “platform operation + alliance” to strengthen terminal control, with strong channel thrust. We estimate that the net profit attributable to the parent company in Shede Spirits Co.Ltd(600702) 2021-23 will be RMB 1.256/18.67/2484 billion, equivalent to EPS of RMB 3.78/5.62/7.48 in 21-23 years, and the current share price corresponds to PE of 54 / 36 / 27 times. Considering the current valuation and future profit growth, we will cover it for the first time and give it a “buy” rating.
Risk warning: epidemic will reduce consumption intention, competition of secondary high-end Baijiu is intensified, and channel cost is not timely.
