CICC has issued a research report on ZJLD (06979), raising its profit forecasts for 2026 and 2027 by 32.2% and 30.8% to 793 million yuan and 992 million yuan, respectively. This revision is attributed to better-than-expected improvements in product mix and cost efficiency. The firm has maintained its target price of HK$11.2, which implies a 53.0% upside from the current share price, and reiterated its Outperform rating.
Key Points from the Report
The report anticipates that the company's performance recovery in the first half of 2026 may exceed market expectations, driven by enhancements in product structure and expense ratios. Benefiting from inventory destocking in the second half of 2025 and strong sales during the Spring Festival, and based on sales data from the first five months, CICC expects first-half 2026 revenue to decline by a mid-single-digit percentage year-over-year. This outlook is more favorable than the market's initial expectation of a double-digit decline. While the core brand, Zhenjiu, is still adjusting in line with the broader sector, its year-over-year decline in the first half is expected to narrow sequentially. The brand Lidubai is outperforming other brands due to its expansion into general distribution channels.
Regarding specific products, based on the company's disclosed progress in recruiting distributors, CICC estimates that the new premium product "Dazhen" could contribute a net incremental performance exceeding 300 million yuan in the first half of 2026. The Lidubai brand is further releasing growth potential with its 1975 product in the 400-yuan price segment and its "Changyin" version in the 200-yuan segment, achieving breakthroughs in markets outside its home province, such as Shandong and Hebei.
CICC believes that as Lidubai's contribution to total revenue increases and higher-priced products like Dazhen help lift gross margins, coupled with the company's adjustments to its expense investment model, the net profit margin for the first half of 2026 could recover to over 20%. This suggests the company's full-year profit performance may surpass market expectations.
Growth Momentum and Outlook
The report notes that Dazhen continues its expansion momentum, with the company disclosing in April that, within a year of its launch, it had signed up over 4,300 distributors and generated cumulative payments exceeding 1 billion yuan. CICC views the company's strategy of controlling Dazhen's supply volume and establishing strict management mechanisms as effective in maintaining stable pricing for the product, with its current performance surpassing the overall industry trend. Beyond Dazhen, the report expects the Zhen15 product to resume growth this year following the company's adjustment to a "monthly promotion" model. Overall, the company's full-year performance is anticipated to bottom out and recover.
The report concludes by highlighting potential risks, including weaker-than-expected sales of new strategic products and a slower-than-anticipated recovery in business consumption scenarios.
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