Shanxi Securities: Give Luzhou Laojiao a buy rating

2021-11-01Shanxi Securities Co., Ltd. and Fangfang conducted a study on Luzhou Laojiao and released a research report "Q3 Performance Accelerates Month-on-Month, Net Profit Margin Continues to Improve", this report gives a buy rating to Luzhou Laojiao, and the current stock price is 231.2 yuan.

Luzhou Old Cellar (000568)

Description of the event

The company released the third quarterly report, the net profit attributable to the owners of the parent company in the first three quarters was 6.276 billion yuan, an increase of 30.32% year-on-year; the operating income was 14.11 billion yuan, an increase of 21.65% year-on-year; and the basic earnings per share were 4.28 yuan, an increase of 30.09% year-on-year.

Event reviews

Performance accelerated sequentially and profit slightly exceeded expectations. In the first three quarters of 2021, the company achieved operating income of 14.11 billion yuan, up 21.65% year-on-year, and net profit attributable to the mother of 6.276 billion yuan, an increase of 30.32% year-on-year. Among them, the single Q3 achieved operating income of 4.793 billion yuan, an increase of 20.89% year-on-year, and the net profit attributable to the mother was 2.049 billion yuan, an increase of 28.48% year-on-year, which was accelerated month-on-month. This was mainly due to the increase in sales revenue of mid-to-high-end liquor. At present, the national cellar 1573 has stood in the high-end top three, and luzhou old cellar 1952, as an important force in the shoulder price section, has jointly become a fist product leading the revival of the first curve; the waist price segment products such as luzhou old cellar special qu and the century-old cellar old cellar wine occupying the second high-end place have steadily increased in volume and price; Luzhou old cellar and black cover and other tower base products have also fully completed the reshaping of brand image and price; Luzhou old cellar custom wine has become one of the most important growth poles for the innovative development and personalized service of Luzhou old cellar, and the Luzhou old cellar product system" Pyramid " overall competitive advantage highlighted.

The proportion of national cellars has increased and the expense ratio has declined, and profitability has been continuously improved. In the first three quarters of 2021, the net profit margin on sales was 44.57%, an increase of 3.28pct year-on-year, and the gross profit margin of sales was 86.3%, an increase of 2.73pct year-on-year, mainly due to the rapid growth of the national cellar and the increase in the proportion of high-end products. The expense ratio during the sales period was 17.83%, a decrease of 0.02pct year-on-year, of which the sales expense ratio was 13.72%, a decrease of 0.02pct year-on-year; the management expense ratio was 5.38%, an increase of 0.13pct year-on-year; and the financial expense ratio was -1.28%, a decrease of 0.3pct year-on-year. In addition, the net cash flow from operating activities in the first three quarters of 2021 was 3.956 billion yuan, an increase of 41.42% year-on-year; the contract liabilities at the end of Q3 were 1.905 billion yuan, an increase of 497 million yuan, an increase of 54.75%, indicating that the channel confidence is stable.

Equity incentives show confidence, and the company's operational vitality is enhanced. Recently, the company launched equity incentives, covering a wide range of areas, and covering a large number of managers and technical backbones, with great incentives. According to the target guidelines, the company's growth rate is expected to reach more than 25% in 2022-23, which will fully mobilize the company's management momentum. According to the "14th Five-Year Plan" strategic plan formulated by the company: "136" strategy. Among them, "1" refers to the goal of firmly returning to the "top three" of China's liquor industry. Therefore, the implementation of equity incentives also helps the company to achieve the goals of the 14th Five-Year Plan.

Investment advice

The company's revenue in the first three quarters achieved 21.65% growth, with the arrival of the peak season, it is expected to complete the annual revenue growth target of 15%. In the medium and long term, benefiting from the expansion of the thousand yuan price band and the shortage of Moutai wine, the future volume price growth space of the national cellar is sufficient, while the reform of low-end and medium-grade wine has accelerated, helping the company to continue to grow. It is estimated that the company's net profit attributable to the mother in 2021-2023 will be 7.535 billion, 9.421 billion and 11.696 billion, and the EPS will be 5.14 yuan, 6.43 yuan and 7.98 yuan respectively, corresponding to the current stock price, PE will be 44 times, 35 times and 29 times, respectively. Maintain a "Buy" rating.

There is risk

Food safety risks and macroeconomic downturns have led to a sharp decline in the price of high-end wine

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 is 262.17; 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.