Hueiji Mountain (601579): Market Expansion Needs Great Expansion

Hueiji Mountain (601579): Market Expansion Needs Great Expansion

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

The product structure continues to be actively optimized, and quality is still evolving.

In 2019, the company will integrate the products with a high degree of overlap in the inspection series. At present, there are about 200 SKUs. In terms of product 杭州夜网 structure, the company insists on “pure five years” as the main product, while using “Huijishan 1743” as an upgrade order.Products, and this year launched ultra-high-end price “Master Lanting” as high-end benchmarking products.

The company stated that the future direction of product quality improvement is to soften the entrance and make it more comfortable after drinking.

  2.

The company’s market development strategy is to consolidate base markets in Zhejiang, Shanghai, and Jiangsu, and to expand Anhui, Fujian and other potential provinces in a planned way.

At this stage, the focus of development outside the province is still Shanghai, which is mainly promoted by the refreshing rice wine “Wu Felt Hat” brand.

  3.

In 2019, the company integrated the dealers and merged small dealers with high overlap.

At present, both inside and outside the province belong to the hierarchical distribution model, and the company’s service to dealers has improved, and marketing expenses in this regard have increased.

  Commentary We believe that the company’s proactive product structure upgrade can bring about a slow increase in gross profit margin.

We estimate that the company’s sales volume of mid-to-high-end rice wine will increase by 1/2% each year in 2019/20, while the low-end rice wine will rank 10%.

However, rice wine only has some kind of large-scale single product at the high-end price, which leads to a longer overall positioning and low-end, and a slow structural upgrade.

  The overall scale of rice wine is relatively small. We believe that the company still needs to strengthen market spending, focusing on expanding the consumer population and application scenarios. It is difficult to substantially improve the fundamentals by pursuing one-sided product structure upgrades.

The company said that the overall scale of rice wine is only 200 trillion, accounting for about 2% of the scale of wine, and the market is highly concentrated in Jiangsu, Zhejiang and Shanghai, and the rice wine consumer group is still to be cultivated.

Taking into account the company’s cost control and the pursuit of profit, we expect the company’s sales expense ratio to remain basically 12% in 2019/20, which is about 20% of the cost of the main competing product, Gu Yue Longshan. We believe that the company’s market promotion effortsStill needs to be strengthened.

  It is suggested that because we are more optimistic about the company’s structural upgrade, we raise our 2019/20 profit forecast7.

3/6.

9% to 1.

5/1.

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

6.2 billion.

  We raise our target 天津夜网 price by 7 due to the upward revision of earnings forecasts.

2% to 8.

6 yuan, corresponding to 28 of 2019/20/21.

7/26.

9/26.

1x P / E, currently expected to correspond to 2019/20/21/29/27.

5/26.

8x P / E with a target price of 1.

5% downside, maintain neutral rating.

  Risks If the rice wine industry is further tightening in marketing, the market may shrink further.