Shede Spirits (SH:600702) Huachuang Securities·2024-10-29 04:15Investment Rating - The report upgrades the investment rating for Shede Liquor (600702) to "Recommended" with a target price of 78 CNY, compared to the current price of 68.16 CNY [1][2]. Core Views - The company reported a significant decline in revenue and profit for the first three quarters of 2024, with revenue at 4.46 billion CNY, down 15.0% year-on-year, and net profit at 670 million CNY, down 48.4% year-on-year. The third quarter alone saw revenue of 1.19 billion CNY, down 30.9%, and net profit of 80 million CNY, down 79.2% [1][2]. - The report highlights that the company is undergoing a rapid inventory clearance process, with a focus on reducing stock levels and adjusting sales strategies. The company is expected to continue this trend into the fourth quarter, with potential for inventory reduction if demand improves in the following year [2][3]. - The report notes that the company's gross profit margin for Q3 was 63.7%, a significant drop of 11.0 percentage points, attributed to accelerated inventory clearance and increased promotional expenses [2][3]. Financial Summary - For 2023, the total revenue is projected at 7.08 billion CNY, with a year-on-year growth rate of 16.9%. However, for 2024, revenue is expected to decline by 19.2% to 5.72 billion CNY [1][2]. - The net profit for 2023 is estimated at 1.77 billion CNY, with a projected decline of 52.9% to 835 million CNY in 2024. The earnings per share (EPS) for 2024 is forecasted to be 2.50 CNY [1][2]. - The report indicates that the company's cash flow remains under pressure, with a net cash flow from operating activities of -120 million CNY in Q3, compared to -60 million CNY in the same period last year [2][3].