Guotai Junan released a research report saying that the "overweight" rating of Lidu (06979) will remain unchanged from 2023 to 2025 with adjusted EPS0.49, 0.61,0.78 yuan, and the target price will be raised from HK $12.09 to HK $14.34. The company's Q3 revenue accelerated growth, high-end to maintain the lead, sub-high-end acceleration and upgrading, rare wine growth engine highlighted, profits continue to rise. The current inventory level is benign, the channel foundation is solid, and the growth potential is expected to continue in 2024.

Guotai Junan's main points are as follows:

Q3 accelerates growth, and the upgrading trend is improving.

Recently, the bank tracked the situation of Lidu 2023Q3 in many dimensions. According to grass-roots research feedback, the company focused on channel inventory control and optimization in July. Mobile sales showed a steady upward trend after the Mid-Autumn Day marketing season gradually began in mid-August. The bank expects sales to accelerate month by month from July to September. Q3 revenue is expected to maintain a growth of about 25% when the base of 2022Q3 is not low in the same period. Under the trend of product structure upgrading and smooth operation of expenses, it is expected that the growth of net profit after adjustment will continue to be faster than that of income.

From the price point of view, 2023H1 high-end pull is significant, Q3 high-end growth is expected to continue, sub-high-end growth acceleration, sub-high-end upgrade strategy begins to appear, Zhen 15 core large single moving sales feedback is positive, Q3 gross profit margin is expected to maintain a small increase; sub-brand, it is expected that Zhenjiu, as the flagship brand and upgrade grasp, is still the company's first growth engine, Lidu natural mobile sales to continue positive growth, Xiang cellar and Kaixiao remain steady.

Inventory is in good condition and channel control is active.

According to grass-roots research, the current rare wine inventory remains at the level of about 2 months, laying a solid foundation for follow-up and a good start in 2024. In recent years, Zhenjiu continues to improve the ability of channel management and control, optimize the quality of dealers, and steadily promote the seed partner marketing strategy to optimize terminal sales, and the inventory digestion ability is more obvious under the advantages of more solid and meticulous channel operation. According to the feedback from Henan dealers, Henan sauce wine has a good atmosphere and low double-digit growth on Mid-Autumn Festival, among which Zhenjiu is more outstanding by virtue of its positive channel strategy.

In 2024, the confidence is full and the value space is highlighted.

Recently, a new wine-making cycle has been launched, and the production scale in the next sand season in 2023 has reached 40, 000 tons, an increase of 5000 tons over 2023, laying the foundation for the future. The company's brand equity is rich, and the organizational management and marketing methods have a strong ability to change butterflies. It is expected to continue double-digit growth in 2024 when the margin is good. Corresponding to only 23XPE in 2023, which is lower than the average valuation of A-share liquor, the high flexibility attribute is expected to accelerate the return of value.

Risk factors: macroeconomic fluctuations, liquidity fluctuations in overseas markets, food safety risks, etc.