Gu Yue Longshan (600059): Excessive demand for rice wine weakens company’s brand value to be released

Gu Yue Longshan (600059): Excessive demand for rice wine weakens company’s brand value to be released

Company dynamics maintains recent status of neutral companies We recently conducted a survey of the company and the company stated: 1.

The company has been vigorously implementing high-end strategies since 2019, and has significantly improved low-end products.

At present, the company mainly promotes the 5/8/10 year series with a retail price of 20-100 yuan / bottle. In 2019, it launched the national brew 1959 with a price of 1,000 yuan, which caused a high-end impact.

  2.

The expansion of markets outside the province will consider cooperation with non-alcoholic or other alcohol distributors.

However, the mature market still retains its own production and sales model, and the company controls its own deep distribution.

  3.

At present, the consumption scenarios of the company’s products are mainly concentrated in the catering channels; the 10-year series with a retail price of about 100 yuan / bottle has certain visibility only in Zhejiang wedding and business banquets.

  Comments The overall demand for rice wine is severely weak, and squeezed by other wine varieties, the rice wine consumer group still needs to be cultivated.

We estimate that the revenue scale of the rice wine industry can only achieve low single-digit growth, mainly due to the expansion of the marketing scale of white wine in East China, coupled with the use of the “shoucheng” strategy by rice wine companies, and channel profits are still increasing.Rebate from about 10% on average), which caused liquor to grab some market share in rice wine.

  We believe that the current increase in the company’s selling expenses cannot substantially boost demand, and its brand marketing expenditures and channel cost allocations need to be increased in order to increase the popularity of rice wine, boost dealers’ motivation, and expand the consumer base.

  We think the improvement of the company’s profitability is mainly due to the structural upgrade.

Through the company’s active structural upgrade, we expect the company’s mid-to-high-end (more than 3 years series) rice wine revenue to increase at a faster growth rate in 2019/20.

4%, revenue accounted for 71/73% respectively, which is the main driving force for the company’s revenue growth, but also promote the company’s gross profit margin.

  We believe that “Guyue Longshan” itself has only a certain brand foundation and national popularity, and also has mastered the core core consumer groups. As an industry leader, we believe it has the potential of nationalization, but the brand value needs to be further explored.

  Estimates suggest that we keep our 2019 earnings forecast basically unchanged, but because of slow sales growth, we lower 深圳桑拿网 our 2020 earnings forecast3.

4% to 1.

8.3 billion, with a profit forecast for 2021 at the same time1.

9.4 billion.

We maintain our target price of 7.

75 yuan is unchanged, corresponding to 36 in 2019/20/21.

9/33.

7/32.

3x P / E, currently expected to correspond to 2019/20/21 40.

5/37.

6/35.

The price-earnings ratio is 6 times, which is currently sustainable at 9.

3% downside, maintain neutral rating.

  Risks If other wine types continue to increase market share, the overall scale of rice wine may further shrink