Completed 50% of its annual sales target in 4M22
? Wuliangye held its 2021 annual shareholders meeting and reiterated its FY22F target
of double-digit yoy sales grow th, unchanged.
? Management said sales of 8th generation of Wuliangye from Jan to Apr had reached c.
50% of its annual sales target, even in the east China market.
? We expect the Company to achieve 12.6% yoy sales grow th w ith net profit up by 14.2%
yoy in FY22F.
? Reiterate Add w ith an unchanged DCF-based TP of Rmb287.
8th generation Wuliangye maintained steady sales growth in Jan-Apr
Management said that total sales of the Company’s core product, 8th generation
Wuliangye, grew steadily yoy in 4M22, and that it had completed c.50% of its annual sales
target. This product contributes c.70% of the Company’s baijiu sales. The Company divides
China into 11 markets. The east China market w as negatively impacted by Omicron since
Mar. In the east China market, sales in Jiangsu province maintained positive yoy growth in
4M22, but sales in Shanghai and Zhejiang provinces declined yoy due to Omicron. Based
on our channel checks, sales in Jiangsu, Zhejiang and Anhui provinces started to recover
in the past two weeks. We expect sales in Shanghai to improve a bit as production resumes
and the market reopens in June. Management maintained its previous guidance of double digit yoy sales growth in FY22F.
Plans to improve the wholesale price in FY22F
For 8th generation Wuliangye, the Company w ill take a couple of measures to improve its
first-layer wholesale price and distributor margin in FY22F: 1) It w ill adopt digital marketing
methods to precisely monitor market supply and provide immediate logistics support
through the construction of 15 new warehouses across the country; 2) It has taken a
socially responsible position in providing support to distributors and consumers during the
pandemic period since Mar. Management believes that Wuliangye’s brand image has
improved and that the Company can meet consumer demand after the lockdown period;
3) It w ill put more effort into exploring the e-commerce channel and the high-end group
customer channel, as sales in the e-commerce channel are currently growing fast and have
not been impacted by Omicron. The Company considers the high-end group customer
channel to be quite important for the classic Wuliangye product with a retail price above
Rmb2,500 per bottle; and 4) It w ill give more autonomy and discretional decision-making
pow er to the front-line sales team, including financial matters and sales person recruitment
to encourage sales initiative and respond quickly to the changing channel conditions to
gain market share.
Increasing product investment to improve brand value
Management considers the classic Wuliangye to be not only the Company’s second growth
driver, but also an important product to improve its brand value. Currently, this product is
still in the introduction stage, and the Company w ill focus on cultivating high-end customers
and promoting brand recognition. The Company has 144 distributors for classic Wuliangye
products. Each distributor usually has 20–30 packages of classic Wuliangye in stock, and
the Company w ill supply more w hen these stocks are sold to maintain tight supply in the
market. The Company w ill also arrange more promotion activities for classic Wuliangye in
its five key cities – Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu – and some
key provincial capitals. The Company w ill set up high-end cultural experience stores in
these Tier 1 cities to introduce the Wuliangye culture and history to customers. The
Company w ill also engage in strategic cooperation w ith influential activities, such as the
Boao Asia Forum, WorldExpo and G20, to improve the brand value.