GTHT Securities has released a research report stating that Zhenjiu Lidu (06979) is innovating its channel model, with initiatives like the Grand Zhen Ten Thousand Merchants Alliance and the Zhen Fifteen Alliance Plan attracting channel partners. Performance is expected to gradually stabilize and recover from a low base. The firm has raised its adjusted EPS forecasts for 2026-2028 to RMB 0.24 (previous: RMB 0.18), RMB 0.28 (previous: RMB 0.20), and RMB 0.33 (previous: RMB 0.23). Referencing the valuation levels of comparable companies, particularly in the sub-premium baijiu segment, GTHT assigns Zhenjiu Lidu a 2026 PE multiple of 32X, maintaining a target price of RMB 7.56 (approximately HKD 8.69, converted at 1 HKD = 0.8704 RMB). The Add rating is reaffirmed.
Key Points from GTHT Securities
Brand Momentum Gradually Recovering, Poised to Emerge from Adjustment
Among the company's four core brands in 2025, revenue for Zhenjiu, Lidu, Xiangjiao, and Kaikouxiao fell by 57%, 17%, 42%, and 70% year-on-year respectively, with the decline accelerating in H2 2025 compared to H1, primarily pressured by demand and industry competition. Entering 2026, with a lower base and continued brand-building investment, the firm anticipates marginal improvement for these brands: 1) Zhenjiu, driven mainly by Zhen Fifteen and Grand Zhen, where the new Grand Zhen product is a significant growth contributor, and channel inventory digested in 2025 (inventory buybacks also impacted that year's revenue). The launch of the fifth-generation Zhen Fifteen in 2026 is expected to support a gradual revenue recovery throughout the year. 2) Lidu, which continues to grow through national expansion and price tier expansion, with initial success in point breakthroughs outside its home province. The Lidu brand also boasts the highest gross margin, positively impacting the company's overall profitability. 3) Xiangjiao and Kaikouxiao, impacted over the past two years by price wars triggered by declining baijiu prices, leading to revenue and gross margin declines. The impact is expected to lessen as the base effect diminishes.
Channel Model Consolidates Merchant Strength
The flagship brand Zhenjiu remains a crucial revenue pillar. Since 2025, the company has proactively adapted through innovative channel models: 1) The Grand Zhen initiative created the Ten Thousand Merchants Alliance mechanism, with over 4,300 alliance merchants signed and collections exceeding RMB 1 billion as of April. A relatively steady pace of merchant recruitment is expected. Considering some regional recruitment channels were closed earlier, subsequent efforts will focus on optimizing existing partners to enhance overall quality. 2) Following the upgrade to the fifth-generation Zhen Fifteen, an alliance plan was implemented, featuring monthly dividend distributions to ensure channel cash flow. Through these measures, Zhenjiu is poised to achieve "revenue expansion" while strengthening channel control through a small-merchant model.
Early Inventory Clearance, Significant Earnings Potential
The industry is still in a consolidation phase. Zhenjiu Lidu cleared inventory relatively early, and its core brands Zhenjiu and Lidu retain a certain market foundation. The company is expected to gradually recover market share in the sub-premium and mass-market price segments, narrowing the revenue decline or potentially turning it positive. Concurrently, the company is optimizing expense allocation, which, combined with revenue performance, could unlock significant earnings elasticity.
Risk Factors
Product and channel expansion falling short of expectations, further weakening demand, and intensifying competition.
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