Summary of the Conference Call for Luzhou Laojiao Company Overview - **Company**: Luzhou Laojiao - **Industry**: Baijiu (Chinese liquor) Key Points and Arguments Digital Transformation and Market Adaptation - Luzhou Laojiao is undergoing a digital transformation to enhance operational efficiency from production to sales, aiming to adapt to future market developments, especially in light of the impact of alcohol bans [2][4][19] - The company has increased its digital investment in the supply chain and is focusing on low-alcohol and multi-specification products while emphasizing marketing towards younger consumers [2][7] Valuation and Financial Metrics - The current price-to-earnings (PE) ratio of Luzhou Laojiao is near historical lows, similar to the deep adjustment period of the baijiu industry in early 2013 [2][5] - The forecasted dividend yield for 2025 is approximately 5.4%, providing strong support for valuation and indicating limited downside potential [2][5] - Short-term valuation is expected to recover from 13 times to 15 times PE, with potential for higher valuation compared to Shanxi Fenjiu, which currently stands at 17-18 times [2][9] Market Conditions and Sales Performance - The baijiu market is expected to see stable volume and price indicators in Q3 2025, following significant disturbances in Q2 [2][6] - The worst phase of market pressure is believed to be over, with signs of improvement and potential positive policy guidance by year-end [2][6] Competitive Advantages - Luzhou Laojiao possesses strong organizational and channel management capabilities, which are considered core competitive advantages [7][11] - The company has implemented a five-in-one channel value chain management system and various strategic adjustments to enhance market penetration and adapt to consumer trends [3][10] Short-term Validation Points - The company has effectively managed inventory and stabilized prices through digital channel management, with improved relationships with distributors leading to increased confidence in receivables [8][11] - The company’s proactive adjustments and digital tools have resulted in effective channel management, despite external pressures [8][20] Future Growth Potential - Luzhou Laojiao is positioned for growth across short, medium, and long-term horizons, with a focus on expanding its low-alcohol product offerings in response to changing consumer preferences [9][28] - The company is preparing to launch additional low-alcohol products based on market demand, indicating a strategic shift towards this growing segment [29][30] Regional Market Strategy - The company has established strong bases in Sichuan and Hebei, focusing resources on these advantageous markets to maximize efficiency and market share [33] - Plans for expansion into East and South China are underway, with a focus on building strategic alliances with distributors and enhancing local marketing efforts [33] Profitability and Valuation Forecast - The overall consumption landscape remains in a recovery phase, with projected revenue decline of about 2% and profit decline of approximately 3% for the current year [34] - Long-term profitability is expected to improve, with a target valuation of around 150 yuan per share, indicating a potential upside of 40% [34] Additional Important Insights - The digital transformation is seen as a necessary response to the evolving market dynamics, shifting from a seller's market to a buyer's market, necessitating better consumer engagement and channel management [21][22] - Luzhou Laojiao's strategic focus on low-alcohol products aligns with broader market trends and consumer preferences, particularly among younger demographics and women [28][29]

Group 1 - The report highlights the deep analysis of Luzhou Laojiao (000568.SZ), emphasizing a consumer-centric approach and digital empowerment of the supply chain to enhance competitive barriers [9][10] - The company is expected to face a 21% underperformance compared to the liquor sector from H2 2023 to H1 2025, with a projected PE decline of 45% due to internal and external cyclical pressures [9][11] - Luzhou Laojiao is actively reducing channel burdens and advancing digital transformation, which is seen as a strategic advantage in a weak industry environment [9][10] Group 2 - The semiconductor industry is experiencing a significant demand increase driven by AI applications, with TI expanding production to meet future needs and storage prices continuing to rise [19][21] - The global semiconductor sales in May 2025 reached $58.98 billion, marking a 19.8% year-on-year growth, with China's semiconductor sales at $17.08 billion, up 13% [21][22] - The report recommends focusing on semiconductor manufacturing companies and AI-related enterprises, highlighting the importance of domestic AI development in the semiconductor supply chain [21][27] Group 3 - The medical and biological sector is witnessing a strong performance, with a focus on innovative drug development, particularly in radioactive ligand therapy, which is expected to grow rapidly [29][30] - The report identifies XTR005 and XTR008 as key products in the pipeline, with XTR005 being the first PET diagnostic radioactive ligand approved in China [30][31] - The overall medical sector is projected to continue its upward trend, with a notable increase in clinical data competitiveness for domestic innovative drugs [31]

Market Performance - The company's stock price has underperformed the liquor sector by 21% from H2 2023 to H1 2025, with a forecasted PE decline of 45% due to a combination of internal and external cycles affecting revenue and performance growth [1] - The company is actively reducing channel burdens and focusing on digital transformation centered around consumers, while also making forward-looking product arrangements [1] - Current PE is close to early 2013 levels, presenting operational and investment opportunities [1] Competitive Barriers - The company is management-driven with organizational and channel advantages, having achieved breakthroughs through deep reforms during historical adjustments [1] - A large and professional sales team supports market expansion, while refined channel management is implemented based on local conditions [1] - The product lineup includes a full-price range with significant growth contributions from major products, rooted in the "Nongxiang" heritage [1] Digital Transformation - The liquor industry has accelerated channel transformation, enhancing C-end bargaining power, leading to rapid growth in online channels and immediate retail [2] - The company leverages technology to empower the supply chain, addressing production challenges and improving management efficiency [2] - Core terminal growth is projected to increase by 40% year-on-year, with membership assets expected to grow by 60% [2] Growth Logic - The company maintains price and market share advantages in the high-end segment, with potential for volume and price growth as the economy recovers [2] - The low-end products are expected to benefit from the trend towards lower alcohol content, while mid-range products meet daily consumer needs [2] - Short-term focus remains on maximizing cost-effectiveness in key markets, with long-term plans for national expansion [2] Investment Recommendations - Despite short-term pressures, the company's long-term growth momentum remains intact, with a revised revenue forecast for 2025-2027 of 30.59/30.84/33.33 billion yuan, reflecting a slight decline in 2025 followed by modest growth [3] - Projected net profit for the same period is 13.03/13.20/14.54 billion yuan, with corresponding P/E ratios of 12.9/12.7 for 2025/2026 [3] - The company is expected to maintain a dividend yield of 5.4% in 2025, supporting its valuation, with a target price range of 152.4-166.4 yuan, indicating a 40% upside potential from the current price [3]

Investment Rating - The investment rating for the company is "Outperform the Market" [5] Core Views - The report highlights that the company is focusing on consumer-centric strategies and digital transformation to enhance its competitive barriers, despite facing short-term growth pressures and valuation discounts [1][3][15] - The company is actively reducing inventory and promoting sales, with a long-term growth potential supported by its proactive management and digital initiatives [3][18] Summary by Sections Market Performance - The company's stock price has underperformed the liquor sector by 21% from H2 2023 to H1 2025, with a projected PE decline of 45% due to slowing revenue and performance growth [1][19] - The current PE is close to levels seen in early 2013, indicating potential investment opportunities [1][19] Competitive Barriers - The company is characterized as management-driven, with strong organizational and channel advantages, having successfully navigated previous industry adjustments through deep reforms [1][35] - The product portfolio includes a wide range of price points, with significant growth potential from major products [1][35] Digital Transformation - The company is leveraging technology to enhance supply chain efficiency and consumer engagement, with significant growth in online sales and membership assets projected for 2024 [2][17] - The digital transformation is seen as essential for adapting to changing consumer demands and improving channel management [2][17] Growth Logic - The company is focusing on multiple price points and national expansion, with strong performance expected from its high-end products and low-alcohol offerings [2][17] - Short-term strategies include concentrating on key markets while preparing for broader national growth in the long term [2][17] Financial Forecasts - Revenue projections for 2025-2027 are estimated at 30.59 billion, 30.84 billion, and 33.33 billion yuan, with corresponding net profits of 13.03 billion, 13.20 billion, and 14.54 billion yuan [3][4] - The report anticipates a dividend yield of 5.4% in 2025, supporting the company's valuation [3][4]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report emphasizes a stable target and pragmatic operations, with a focus on sustainable development and maintaining a healthy channel [6] - The company has announced a share buyback plan, with the controlling shareholder increasing their stake to 50.98% [6] - The dividend payout ratio for 2024-2026 is set to be no less than 65%, 70%, and 75% of the net profit attributable to shareholders, with a minimum cash dividend of 8.5 billion RMB each year [6] Financial Data and Profit Forecast - Total revenue for 2025 is projected at 31,208 million RMB, with a year-on-year growth rate of 0% [5] - The net profit attributable to the parent company for 2025 is estimated at 13,532 million RMB, reflecting a year-on-year growth of 0.4% [5] - The earnings per share for 2025 is expected to be 9.19 RMB [5] - The gross margin is forecasted to be 87.3% for 2025, with a return on equity (ROE) of 25.9% [5] - The price-to-earnings (PE) ratio for 2025 is projected at 12x, which is considered reasonable compared to leading high-end liquor companies [6] Recent Performance - In Q1 2025, the company achieved a revenue of 93.5 billion RMB, a year-on-year increase of 1.78% [6] - The net profit for Q1 2025 was 45.9 billion RMB, with a net profit margin of 49.3% [6] - The cash flow from operating activities in Q1 2025 was 33.1 billion RMB, a decrease of 24.1% year-on-year [6]

Core Viewpoint - The company achieved a revenue of 31.2 billion yuan in 2024, a year-on-year increase of 3.2%, with a net profit attributable to shareholders of 13.47 billion yuan, up 1.7% year-on-year. However, Q4 2024 saw a revenue decline of 16.9% and a net profit decrease of 29.9% [1] Group 1: Financial Performance - In Q1 2025, the company reported a revenue of 9.35 billion yuan, a year-on-year increase of 1.8%, and a net profit of 4.59 billion yuan, up 0.4% year-on-year [1] - The company's gross margin decreased by 0.8 percentage points to 87.5% in 2024, with a further decline of 1.9 percentage points to 86.5% in Q1 2025 [2] - The net profit margin for 2024 decreased by 0.7 percentage points to 43.3%, while in Q1 2025, it fell by 0.5 percentage points to 49.3% [2] Group 2: Product and Market Dynamics - The company’s mid-to-high-end liquor segment generated a revenue of 27.59 billion yuan in 2024, a year-on-year increase of 2.8%, with sales volume up 14.4% but average price per ton down 10.2% [1] - The company is focusing on consumer cultivation and channel development to maintain market growth, with the Guojiao brand remaining in the 20 billion yuan category [1] - Traditional and emerging channels achieved revenues of 29.57 billion yuan (+3.2%) and 1.48 billion yuan (+4.2%) respectively in 2024 [1] Group 3: Dividend and Future Outlook - The company announced a cash dividend of 45.92 yuan per 10 shares (including tax), reflecting a commitment to shareholder returns [1] - The management has set a dividend payout ratio of no less than 65%/70%/75% for the years 2024-2026, with a minimum total dividend of 8.5 billion yuan (including tax) each year [3] - The company aims for steady revenue growth in 2025, with a target EPS of 9.39 yuan, 10.31 yuan, and 11.31 yuan for 2025-2027, corresponding to PE ratios of 13x, 12x, and 11x respectively [3]

Core Viewpoint - Luzhou Laojiao has maintained steady growth despite the deep adjustment in the liquor industry, as evidenced by significant increases in key financial metrics and a strong outlook for future performance [1][3]. Financial Performance - In 2024, Luzhou Laojiao achieved revenue of 31.196 billion yuan and a net profit attributable to shareholders of 13.473 billion yuan, continuing growth into the first quarter of 2025 [3]. - The company reported a gross margin of 87.54% and a net margin of 43.27% for 2024, ranking second among publicly listed liquor companies after Kweichow Moutai [3]. - Contract liabilities (advance payments) reached 3.978 billion yuan, a year-on-year increase of 49%, with a further 21% growth in the first quarter of 2025, exceeding broker expectations [3][4]. Cash Flow and Dividends - The cash collection ratio reached 128.34%, with net cash inflow from operating activities of 19.182 billion yuan, an 80% year-on-year increase, and total cash on hand of 33.578 billion yuan [4]. - The board announced a cash dividend of 45.92 yuan per 10 shares (including tax), leading to a total cash dividend of 8.758 billion yuan for 2024, with a payout ratio increased to 65% [4][5]. - The company plans to increase the dividend payout ratio to 75% by 2026, ensuring a minimum annual cash dividend of 8.5 billion yuan [5]. Market Position and Strategy - Luzhou Laojiao's dual-brand strategy includes Guojiao 1573 and Luzhou Laojiao, with Guojiao 1573 being a key high-end product competing with Kweichow Moutai and Wuliangye [5][7]. - The company reported that Guojiao brand sales exceeded 20 billion yuan, while Luzhou Laojiao brand sales surpassed 10 billion yuan, indicating expanded market coverage and penetration [5]. - The company is focusing on digital transformation and channel development, emphasizing consumer engagement through bottle scanning and targeting lower-tier markets for growth [7][8]. Industry Context - The liquor market is characterized by a "one super, two strong" structure, with Kweichow Moutai, Wuliangye, and Luzhou Laojiao being the only three companies with high-end market access [8]. - The high-end liquor market is projected to reach 166.4 billion yuan by 2026, with a compound annual growth rate (CAGR) of 12% from 2021 to 2026, indicating a trend towards concentration among leading brands [9]. - Luzhou Laojiao's unique resources, such as the "1573 National Treasure Cellar Group," provide a competitive edge in producing high-quality liquor, ensuring the scarcity of its flagship product [9].

在白酒行业竞争形势愈发复杂的背景下，泸州老窖仍然交出稳健的业绩答卷。 2024年，泸州老窖实现营收311.96亿元，同比增长3.19%；实现净利润134.73亿元，同比增长1.71%，各项 业绩指标稳健增长。 取得优异成绩的同时，泸州老窖也为投资者带来了丰厚的回报。 本次年报披露最新的利润分配预案，拟向全体股东每10股派发现金红利45.92元（含税）。叠加2024年中 期分红，去年全年现金分红总金额将超过87亿元。 $$\bigcup\mathrm{~I~}_{\mathrm{~}}$$ 白酒行业存量竞争，消费多元、强分化特点显著。巩固存量、拦截流量、拓展增量，被认为是企业在周 期调整中突围的重要路径。 泸州老窖已通过"双品牌、三品系、大单品"构建起覆盖全价格带的产品矩阵。 "金字塔形"的产品结构不仅扩大了企业的目标消费群体，也使其面对需求分化的市场时，应变更为灵活 自如，整体抗风险能力得到增强。 具体来看，国窖品牌稳居200亿阵营并向更高目标发起冲刺。国窖1573已跻身中国三大高端白酒行列，持 续打造稀缺性产品、强化品牌势能，连接高净值人群。 泸州老窖品牌突破百亿体量，在中低端价位凭借头曲、黑盖等产品，充分 ...

Investment Rating - The investment rating for the company is "Outperform the Market" [6][4][12] Core Views - The company achieved a total revenue of 31.2 billion yuan in 2024, with a year-on-year growth of 3.2%, and a net profit of 13.5 billion yuan, reflecting a year-on-year increase of 1.7% [1][4] - The company has set a shareholder return plan for 2024-2026, committing to a cash dividend of no less than 65%/70%/75% of net profit for each year [1] - The company is focusing on digital transformation, which is expected to enhance internal management efficiency and eventually lead to revenue growth as the consumer-centric model is established [4][3] Summary by Sections Financial Performance - In 2024, the company recorded a total revenue of 31.2 billion yuan, with a year-on-year increase of 3.2%, and a net profit of 13.5 billion yuan, up 1.7% year-on-year [1][5] - The revenue for Q4 2024 was 6.89 billion yuan, down 16.9% year-on-year, while the net profit was 1.88 billion yuan, down 29.9% year-on-year [1] - For Q1 2025, the company reported a total revenue of 9.35 billion yuan, with a year-on-year growth of 1.8%, and a net profit of 4.59 billion yuan, up 0.4% year-on-year [1] Product and Market Analysis - The sales of the Guojiao brand exceeded 20 billion yuan, while the Luzhou Laojiao brand surpassed 10 billion yuan in 2024 [2] - The revenue from mid-to-high-end liquor reached 27.6 billion yuan, with a year-on-year increase of 2.8% [2] - The company is actively expanding both traditional and new sales channels, with revenue growth of 3.2% and 4.2% respectively in 2024 [2] Cost and Margin Analysis - The gross margin for liquor business decreased by 0.8 percentage points year-on-year, primarily due to a reduction in the payment price for Guojiao [2] - The company managed to maintain a good level of expense management, with the tax rate and sales expense ratio showing slight increases [2][3] Future Outlook - The company has adjusted its revenue and net profit forecasts for 2025-2027, expecting revenues of 31.7 billion yuan, 33.4 billion yuan, and 35.5 billion yuan respectively, with year-on-year growth rates of 1.7%, 5.2%, and 6.4% [4][11] - The net profit forecasts for the same period are 13.6 billion yuan, 14.2 billion yuan, and 15.2 billion yuan, with year-on-year growth rates of 0.5%, 4.5%, and 7.1% [4][11]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company demonstrates stable operations, with an upward revision in dividends highlighting its long-term value [1] - The company achieved a total revenue of 31.2 billion yuan in 2024, reflecting a year-on-year growth of 3.2%, and a net profit attributable to shareholders of 13.5 billion yuan, up 1.7% year-on-year [9] - The company plans to maintain a dividend payout ratio of no less than 65% for 2024, 70% for 2025, and 75% for 2026, with a minimum cash dividend of 8.5 billion yuan [14] Revenue and Profitability - In Q1 2025, the company reported a revenue of 9.35 billion yuan, a year-on-year increase of 1.8%, with a net profit of 4.59 billion yuan, up 0.4% [9] - The sales net profit margin decreased by 0.5 percentage points to 49.3% in Q1 2025, primarily due to a decline in gross sales margin [3] - The gross margin for Q1 2025 was 86.5%, down 1.9 percentage points year-on-year [3] Financial Forecasts - The company forecasts total revenue of 31.9 billion yuan for 2025, with a net profit of 13.8 billion yuan, and projects a net profit of 16.5 billion yuan by 2027 [1][15] - The projected P/E ratios for 2025, 2026, and 2027 are 13, 12, and 11 respectively [14] Market Position and Strategy - The company is focusing on enhancing its marketing strategies, including the integration of dining and wine experiences, which has shown positive results in sales [3] - The company has successfully implemented digital initiatives, achieving a nearly 30% opening rate for core products through QR code scanning [9] Shareholder Returns - The company has a planned dividend yield of 4.7% for 2024, indicating strong shareholder returns [14] - The company’s total market capitalization is approximately 184.5 billion yuan [6]