Summary of Key Points from the Conference Call Records Industry Overview: Baijiu Industry Core Insights and Arguments - **Zhenjiu Li Du**: - The company has initiated a 26-year repayment plan with inventory levels around 3+ months [1] - Recent batch prices for Zhen30, Zhen15, Zhen10, and Zhen5 are 720, 305, 260, and 110 yuan respectively [1] - Over 4,000 contracts signed with major Zhen Alliance merchants, achieving over 700 million yuan in repayments [1] - The second phase of Zhenjiu's expansion has halted recruitment in 15 counties, with a strategy of replacing existing merchants [1] - The "Zhen 2021 Real Vintage" is set to launch, while the 2020 vintage will cease production by year-end, with a price increase of 10 yuan per bottle starting January 10 [1] - Zhenjiu's classic version has been officially launched at a suggested retail price of 208 yuan per bottle, now available in Guizhou [1] - **Yanghe Co.**: - The company has achieved a 20% repayment progress for 2026, with average inventory levels of 2.5-3 months [2] - Batch prices for M6+, M3 Crystal Edition, Tianzhilan, and Haizhilan are 560, 360, 240, and 115 yuan respectively [2] - Yanghe has been selected as an official sponsor for "Su Super" [2] - No mandatory repayment requirements during the Spring Festival, with current inventory below 2 months [2] - **Jinshi Yuan**: - The company reports a 25% repayment progress for 2026, with average inventory around 3.5 months [2] - Batch prices for Dikai, Si Kai, and V3 are approximately 240, 405, and 500 yuan [2] - Jinshi Yuan has sponsored "Su Super" for two consecutive years [2] - The company is adapting to changes in consumer behavior, with a notable increase in the sales of its light and elegant products [2] - The company aims to maintain a stable market presence and pricing strategy while expanding its product matrix [2] - **Gu Jing Gong Jiu**: - The company has a 25% repayment progress for 2026, with inventory levels around 5+ months [3] - Batch prices for Gu20, Gu16, Gu8, Gu5, and Xianli are 510, 310, 190, 103, and 76 yuan respectively [3] - Gu Jing Gong Jiu announced a cash dividend distribution plan totaling 529 million yuan [3] - **Kouzi Jiao**: - The company has initiated a 26-year repayment plan with average inventory levels of 4+ months [3] - Batch prices for Kouzi 30, 20, 10, and 6 years are 700, 300, 200, and 120 yuan respectively [3] - The company reported significant declines in high-end and mid-range product revenues, with a notable increase in low-end product sales [3] - **Yingjia Gong Jiu**: - The company has a repayment progress of 20-30% for 2026, with average inventory around 5+ months [4] - Promotional prices for Dong6, 9, and 16 are 110, 185, and 285 yuan, with stable batch prices [4] - The company aims for a 30% repayment target in Q1, with expectations for continued growth in Dong6 and 9 [4] - **Jinhui Jiu**: - The company has initiated a repayment plan for 2026 [5] - Plans to distribute nearly 100 million yuan in cash dividends [5] - Positive feedback from the Northwest region indicates potential market share growth due to a lack of strong competitors [5] - The company has seen revenue growth in products priced below 100 yuan, with a rising share in the 300 yuan and above segment [5] Other Important Insights - The overall sentiment in the Baijiu industry reflects cautious optimism, with companies focusing on maintaining stable pricing and adapting to changing consumer preferences [2][3][4][5] - The impact of the Spring Festival on sales and repayment expectations is a common theme, with companies expressing a mix of caution and strategic planning for the upcoming period [2][3][4]

Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The company reported a revenue of 2.497 billion RMB for the first half of 2025, a year-on-year decrease of 39.6%, and a net profit attributable to shareholders of 575 million RMB, down 23.5% year-on-year [2] - The company launched several new products in H1 2025, including Zhen 50 and Li Du Gao Liang 1965, aiming to enhance market presence and sales through a new alliance model [3] - The revenue breakdown by product shows significant declines, with Zhen Jiu and other brands experiencing revenue drops of 45%, 9%, 39%, and 64% respectively [3] Revenue and Profit Analysis - The company expects revenues to decline by 20.4% in 2025, followed by growth of 11.7% in 2026 and 16.8% in 2027 [5] - The adjusted net profit is projected to decrease by 1.9% in 2025, but increase by 19.6% in 2026 and 28.4% in 2027 [5] - The overall gross margin for H1 2025 increased by 0.3 percentage points to 59.0%, while sales and distribution expenses decreased by 38.5% year-on-year [4] Product and Pricing Strategy - Revenue from high-end, mid-range, and low-end products in H1 2025 was 580 million, 980 million, and 940 million RMB respectively, with year-on-year declines of 47%, 42%, and 31% [4] - The gross margin for high-end products decreased due to internal structural adjustments, while mid-range and low-end products saw margin improvements due to cost optimizations [4] Market Position and Future Outlook - The company has established a significant network of over 2,100 alliance partners for its new product line, which is expected to contribute positively starting in H2 2025 [3] - The report indicates that the company is leveraging its experience in high-end liquor operations to enhance the performance of its new product offerings [3]

Core Viewpoint - The company has launched a new strategic product "Dazhen·Zhenjiu" priced at 888 RMB, targeting the market for high-quality liquor priced around 2000 RMB, responding to rational consumption trends [1] Group 1: Product Launch and Market Strategy - The new product features a five-year base liquor and is complemented by over 20 years of aged liquor for flavoring, emphasizing its rarity and quality [1] - The product's packaging design is minimalist, enhancing its high-end recognition, and aims to penetrate market demand through its quality-price ratio [1] - The company aims to build a strong trust chain among manufacturers, merchants, and consumers, focusing on creating a market-impacting phenomenon with this product [1] Group 2: Innovative Business Model - The "Wanshang Alliance" model ensures transparent pricing at the terminal level, with strict channel control by the manufacturer to secure high channel profits [2] - The company employs a four-tier supervision mechanism involving sales personnel, alliance merchants, auditors, and headquarters, which has already led to the expulsion of over 20 non-compliant merchants [2] - The company anticipates reaching 5,000 to 8,000 signed merchants by 2026, with current signed merchants at 2,116, and sees potential for further client conversion from competitors [2] Group 3: Marketing and Sales Outlook - The company plans to adjust its marketing strategy in 2025, focusing on inventory clearance, with stable channel order in key provinces like Guizhou, Henan, Hunan, and Guangdong [3] - The company expects sales volume recovery in the future as the market stabilizes, particularly for its existing products [3] - The company has revised its non-IFRS net profit forecasts for 2025-2027 to 1.27 billion, 1.61 billion, and 1.97 billion RMB, respectively, reflecting growth potential driven by the new product [3]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company is launching a new strategic product, "Da Zhen," priced at 888 RMB, which aims to meet rational consumption demands with high quality and competitive pricing [12][13] - The "Wan Shang Alliance" model is expected to innovate the channel structure, ensuring transparent pricing and high channel profits, which could lead to significant market impact [16][25] - The company anticipates a recovery in sales as inventory is cleared, particularly in key provinces where channel order remains stable [33] Summary by Sections New Product Launch - The new product "Da Zhen" is designed to appeal to consumers seeking high quality at a reasonable price, featuring a five-year base liquor and over 20 years of aged liquor for flavor enhancement [13][12] - The product's packaging and anti-counterfeiting measures have been upgraded to enhance its market appeal and consumer trust [13][14] Channel Innovation - The "Wan Shang Alliance" model focuses on low entry barriers and high returns, promoting a trust chain among manufacturers, merchants, and consumers [16][25] - The model includes strict price control and a four-tier supervision mechanism to maintain channel order and profitability [20][26] Sales Recovery - The company is adjusting its marketing strategy to focus on inventory clearance, with expectations for early recovery in sales as market conditions improve [33][35] - Key provinces like Guizhou, Henan, Hunan, and Guangdong are expected to maintain stable channel orders, with specific products positioned for growth in banquet scenarios [33] Financial Forecasts - The company has adjusted its non-IFRS net profit forecasts for 2025-2027 to 1.27 billion, 1.61 billion, and 1.97 billion RMB respectively, reflecting optimism about the new product's contribution [44][49] - The report indicates that the company's PE ratios are competitive compared to peers, suggesting potential for growth as market conditions stabilize [47][50]

Core Viewpoint - The company anticipates a significant decline in revenue and net profit for the first half of 2025, primarily due to high base effects, cyclical downturns, and impacts from Q2 market conditions [1] Revenue Summary - The company expects revenue for H1 2025 to be between 2.4 to 2.55 billion RMB, representing a year-on-year decline of 38.3% to 41.9% [1] - All sub-brands are estimated to face pressure, with the main brand, Zhenjiu, experiencing a decline consistent with the overall trend, while Lidu shows limited decline [1] Profit Summary - The forecasted net profit attributable to shareholders for H1 2025 is between 570 to 580 million RMB, reflecting a year-on-year decrease of 23% to 24% [1] - The non-IFRS net profit is expected to be between 610 to 620 million RMB, indicating a decline of 39% to 40% [1] - The adjusted net profit margin is projected to remain stable at 24% to 25% [1] Market Strategy - The company is actively controlling shipment rhythms to help clear channels, with stable sales shares for key products in core markets [1] - The company is focusing on nurturing brand recognition and has positive progress in new product launches, which are expected to contribute to revenue in H2 2025 [1] Industry Context - The industry is undergoing a deep adjustment, with the company adapting its strategy to address the pressures from declining business consumption and price reductions in premium liquor [1] - The company is shifting its customer base towards new quality-driven enterprises and is introducing high-quality products at competitive price points [1] Future Outlook - The company anticipates a potential recovery in revenue growth in H2 2025, following a concentrated clearing and product updates in 2025 [2] - The non-IFRS net profit forecasts for 2025 to 2027 have been adjusted to 1.23 billion, 1.37 billion, and 1.68 billion RMB respectively, reflecting a more cautious outlook [2]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company is facing significant revenue pressure in the first half of 2025, with expected revenue decline of 38.3% to 41.9% year-on-year, and net profit decline of 23% to 24% [7] - Despite the challenges, the company is actively managing its operations, maintaining a stable profit margin of 24% to 25% in the first half of 2025, indicating strong cost and expense control capabilities [7] - The company is focusing on clearing inventory and optimizing its distribution channels, with expectations for a more controlled revenue decline in the second half of 2025 as market conditions improve [7] - The company is adapting to industry pressures by shifting its customer base and product offerings, including the introduction of new products at competitive price points [7] Financial Forecasts - Total revenue is projected to be 7,060 million in 2023, with a slight increase to 7,067 million in 2024, followed by a significant drop to 5,026 million in 2025 [1] - The net profit for 2023 is estimated at 2,327 million, decreasing to 1,324 million in 2024, and further to 1,158 million in 2025 [1] - Non-IFRS net profit is expected to be 1,623 million in 2023, with a decline to 1,676 million in 2024, and a drop to 1,233 million in 2025 [1] - The report adjusts the non-IFRS net profit forecasts for 2025 to 12.3 billion, 13.7 billion, and 16.8 billion for 2025, 2026, and 2027 respectively [7] Market Data - The closing price of the stock is 7.38 HKD, with a market capitalization of approximately 22,749.82 million HKD [5] - The company has a price-to-earnings (P/E) ratio of 9.77 for the current price and latest diluted earnings per share (EPS) of 0.69 [1] - The company’s book value per share is 4.12, with a debt-to-asset ratio of 28.84% [6]

Investment Rating - The report maintains a "Buy" rating for the company [4][6]. Core Views - The company is expected to face a revenue decline of approximately 38.3% to 41.9% year-on-year for the first half of 2025, with a projected net profit decrease of 23% to 24% [1][2]. - The company is actively responding to external pressures by adjusting its payment and delivery schedules, focusing on channel health, and launching strategic flagship products [2][3]. - Despite the challenges, the company’s brand possesses unique characteristics and a diversified marketing system, which may support regional and capacity expansion [1][4]. Summary by Sections Financial Performance - For the first half of 2025, the company anticipates revenue between 24.0 to 25.5 billion RMB, with a year-on-year decline of 38.3% to 41.9% [1]. - The expected net profit attributable to the parent company is around 5.7 to 5.8 billion RMB, reflecting a decrease of 23% to 24% year-on-year [2]. - Adjusted net profit is projected to be approximately 6.1 to 6.2 billion RMB, indicating a decline of 39% to 40% [2]. Strategic Initiatives - The company is launching new strategic flagship products, including "珍 10" and "大珍·珍酒," to capture market share in both mid-range and high-end segments [3]. - Efforts are being made to solidify the competitive position of existing flagship products and enhance penetration in core markets [3]. - The company aims to tap into emerging consumer trends and scenarios, such as products for birthdays and weddings [3]. Future Outlook - The revenue forecast for 2025 to 2027 has been adjusted downwards by 27% across the board, with expected earnings per share (EPS) of 0.34, 0.38, and 0.44 RMB for the respective years [4][12]. - The target price is set at 8.04 HKD, based on a price-to-earnings (PE) ratio of 22x for 2025 [4][6]. - The company is expected to maintain a relatively stable net profit margin despite the adjustments, reflecting confidence in its core business profitability [12].