Pacific: Luzhou Laojiao was given a buy rating with a target price of 264.46 yuan

2021-10-30Pacific Securities Co., Ltd. Huang Fusheng, Cai Xueyu, Li Menghu conducted a study on Luzhou Laojiao and released a research report "Luzhou Laojiao: Better Performance growth under a high base, advance payment guarantee for the whole year", this report gives a buy rating to Luzhou Laojiao, believing that its target price is 264.46 yuan, the current stock price is 228.95 yuan, and the expected increase is 15.51%.

Luzhou Old Cellar (000568)

Event: The company released the third quarter report of 2021, and achieved revenue of 14.110 billion yuan (+21.6%), net profit attributable to the mother of 6.276 billion yuan (+30.3%), and net profit of 6.277 billion yuan (+30.4%) in the first three quarters of 2021. In 2021Q3, the operating income was 4.793 billion yuan (+20.9%), the net profit attributable to the mother was 2.049 billion yuan (+28.5%), and the non-attributable net profit was 2.068 billion yuan (+30.8%).

Revenue continued to grow well, and the performance was in line with expectations. In the first three quarters of 2021, it achieved revenue of 14.110 billion yuan (+21.6%), net profit attributable to the mother of 6.276 billion yuan (+30.3%), and net profit of 6.277 billion yuan (+30.4%) after deducting non-attributable net profit. In 2021Q3, the operating income was 4.793 billion yuan (+20.9%), the net profit attributable to the mother was 2.049 billion yuan (+28.5%), and the non-attributable net profit was 2.068 billion yuan (+30.8%). Structurally, the national cellar maintains a high growth, while the low-end wine is expected to gradually stabilize and recover in Q3.

In terms of cash flow, in the first three quarters of 2021, the company's sales revenue was 15.251 billion yuan (+33.3%). In 2021Q3, the company's sales revenue was 4.398 billion yuan (-14.8%). As of the end of September, the company's contract liabilities + other current liabilities were 2.153 billion yuan, an increase of 763 million yuan and 497 million yuan year-on-year and month-on-month, respectively, which is estimated to be related to the advanced progress of high-end national cellar payment.

Higher net margin was driven by higher gross margin and lower selling expense ratio. In 2021Q3, the company's net profit margin was 42.8% (+2.5pct), the gross profit margin was 87.5% (+0.6pct), and the sales expense ratio was 15.7% (-1.3pct), mainly due to the refinement of expense investment, strong pertinence, efficiency improvement, and the repeated impact of the epidemic this year on the pace of expense delivery. 2021Q3 management expense ratio of 5.2% (+0.2pct), financial expense ratio of -1.1% (-0.9pct), gross sales difference of 71.8% (+1.9pct). The company further demonstrated profit elasticity on top of last year's high net interest rate.

Channel + product resonance, equity incentives further enhance the team's motivation, to help the company's medium and long-term rapid growth. (1) Channel development: In July 2020, the company contacted high-quality dealers in Jiangsu, Zhejiang and Shanghai to establish the national cellar "Yangtze River Delta 38 Degree Alliance", and the market development in East China ushered in an acceleration. (2) Product side: The light bottle wine "Luzhou Old Cellar Black Cover" launched during the "Spring Sugar" period in 2021 has successively completed the paving work in multiple markets. Recently released a high-end strategic new product Luzhou Laojiao 1952, positioned as a strategic leading brand of Luzhou Laojiao strain, further improving the overall product layout, and the dual brands of national cellar and old cellar are jointly released. (3) Equity incentives: The company's recently released draft equity incentives involve 9 senior executives and 512 core backbones, and 2021-2023 is a three-year assessment period, and the assessment conditions are that the profit growth rate of three years compared with 2019 is not less than 75 centiles of the benchmarking enterprises. According to the current situation, the company has a high probability of cashing in 2021, and the interest mechanism is rationalized to raise the overall momentum of the company, and further enhances the certainty of high growth. In the short term, the survey shows that the national cellar batch price is stable, the Mid-Autumn Festival sales are benign, the national payment collection progress is 90%, and the annual target is worry-free. In the medium and long term, benefiting from the expansion of the thousand yuan price band, the future volume and price growth space of the national cellar is sufficient.

Profit forecast: It is expected that the revenue growth rate from 2021 to 2023 will be 20.94%, 24.07%, 19.06%, the net profit growth rate attributable to the mother will be 27.85%, 26.12%, 25%, and the EPS will be 5.24, 6.61, 8.26 yuan / share, giving 40 times PE next year, the target price is 264.46 yuan, and the buy rating.

Risk warning: Channel development is not as expected as risky, and the performance of new products is not as expected.

A total of 38 institutions have given ratings in the last 90 days, 33 buy ratings and 5 overweight ratings; the average target price of institutions in the past 90 days has been 251.9; the Securities Star Valuation Analysis Tool shows that Luzhou Laojiao (000568) good company rating is 4.5 stars, good price rating is 2.5 stars, and valuation comprehensive rating is 3.5 stars.