SCSF(SH:600779) 3 6 Ke·2025-05-24 01:21Core Viewpoint - Water Jiufang, the only foreign-controlled liquor company among 19 A-share listed liquor enterprises, is struggling to establish a strong position in the high-end market while lacking a solid presence in the lower-end market, leading to a passive situation of being unable to compete effectively in either segment [2][10]. Financial Performance - In 2024, Water Jiufang reported a revenue of 5.217 billion yuan, a year-on-year increase of 5.32%, and a net profit of 1.341 billion yuan, up 5.69% year-on-year [3][5]. - Despite the growth, the company has been experiencing a significant gap compared to first and second-tier liquor companies, with a net profit margin of only 15.1% in Q4 2024, the lowest in five years [5][12]. - In Q1 2025, revenue continued to slow, reaching 959 million yuan, a year-on-year increase of 2.74%, while net profit was 190 million yuan, up 2.15% [6][7]. Cash Flow Concerns - The company's operating cash flow dropped sharply from 1.734 billion yuan in 2023 to 744 million yuan in 2024, a decline of 57% [8]. - In Q1 2025, the cash flow turned negative at -576 million yuan, a staggering year-on-year decrease of 463.2% [6][8]. Product Structure and Market Position - The product "Zhenniang No. 8," priced at 428 yuan, is a key contributor to Water Jiufang's revenue, with expected sales of around 3 billion yuan in 2024 [9]. - High-end liquor accounted for 91.32% of total revenue in 2024, but growth in this segment is slowing, with only a 1.99% increase year-on-year [9][14]. - The company has been focusing on the next high-end market (300-800 yuan), but faces challenges from both high-end brands and low-end competitors [10][15]. Strategic Challenges - Water Jiufang's high-end strategy has not yielded expected results, with significant issues in brand recognition and market competition [12][14]. - The company has a limited number of distributors and a concentrated geographic presence, making it difficult to compete effectively in the mid-to-low-end market [16]. - Inventory issues are becoming critical, with stock levels reaching 2.939 billion yuan in 2024, a 21% increase, and a turnover period of 180 days [17]. Internationalization Efforts - Water Jiufang's international strategy has not translated into significant growth, with overseas revenue of 57.82 million yuan in 2024, but a sharp decline of 84.35% in Q1 2025 [18]. - The company lacks a robust global distribution system and has not effectively penetrated local markets, limiting its international growth potential [18][19].