Kouzijiao (603589): Need to focus more firmly on sub-high end

Kouzijiao (603589): Need to focus more firmly on sub-high end

3Q19 results were lower than market expectations
3Q19 performance, income 34.

6.6 billion, an increase of 8.

05%, net profit attributable to mother 12.

9.6 billion, an increase of 13.


In 天津夜网 the third quarter, revenue / profit fell by 0% year-on-year.

15% / 1.

80%, the average is significantly lower than market expectations, mainly due to the lackluster market demand in the Mid-Autumn Festival National Day of Anhui, and the company’s new products have not yet been shipped in large quantities.

Development Trend The strategic transformation of Kouzi Warehouse is relatively late, and we believe that the actual sales of the company’s sub-high-end new products still need to be observed.

The company’s core focus in the past was on the RMB 100 yuan kouzi warehouse for 5/6 years. In 2016/17, the revenue of products at this price increased by 29% / 15%, significantly surpassing the popular liquor brands such as Gujing Gongjiu / Yanghe Co.Growth rate.

But the company caught up to 2016?
The 17-year high-end wave has only been strategically focused on the sub-high-end since 2018, and due to the sparse layout of the price bands of the Kouzi Warehouse in 10/20, it can meet the rise of demand in the Anhui market at two sub-price levels of 200 and 500 yuan.

As a comparison, the ancient price of 200 yuan increased by 52% / 85% in 2017/18.

The company launched positioning 200 this year?
The early summer / mid-autumn price of 400 yuan is different from the original vintage series, and the brand’s second creation is more demanding. Considering the fierce competition, we think its actual sales situation still needs to be observed.

Revenue from markets outside the province increased by 20 in the first 上海夜网论坛 three quarters.

6%, still maintaining a relatively rapid growth rate.

The company’s cultivation in the core markets outside the province has gradually matured, it has started to pay off, and it has begun to cultivate new core markets.

We expect revenue growth of 27% in the fourth quarter, mainly due to the continuous launch of new products and the advance of the Spring Festival.

New product orders of $ 300 million are expected to ship in the fourth quarter due to increased packaging capacity.

At the same time, the Spring Festival in 2020 is ahead of schedule. We expect the company’s shipments in December to increase significantly over the same period of previous years.

Earnings Forecasts and Estimates We lowered EPS5 for 2019/20 due to lower revenue growth at the next higher price point.

5% / 7.

8% to 2.


33 yuan, down 11.

7% to 73.

26 yuan, corresponding to 24 in 2019/20.

8x / 22.

0x P / E, current price corresponds to 2019/20 17

3x / 15.

The price-earnings ratio is 4 times, and the target price has 43% upside. Maintain Outperform rating.

Risks If new product sales fall short of expectations, the company’s overall revenue will fall short of expectations.