Huachuang Securities has issued a research report maintaining a "Strong Buy" rating for ZJLD (06979). In 2025, the company is focusing on alleviating pressure on its main products, with the mid-year launch of Da Zhen aimed at creating a new growth driver; merchant recruitment is currently progressing steadily. Looking ahead to 2026, the main product Zhen Jiu is expected to undergo continuous adjustments, while efforts will be made to expand market space with lower-tier products. Da Zhen is preparing for a major push and is anticipated to become the primary growth engine. Based on the latest earnings announcement, the bank has adjusted its EPS forecasts for 2025-2027 to RMB 0.16, RMB 0.16, and RMB 0.19 (previously RMB 0.36, RMB 0.44, and RMB 0.50). Considering the industry's bottoming phase and the typical higher valuation of sub-premium liquor companies, the target price is maintained at HKD 12.
The main views of Huachuang Securities are as follows:
The company released its full-year 2025 performance forecast. Full-year revenue is projected to be between RMB 3.55 billion and RMB 3.70 billion, a year-on-year decrease of 47.7% to 49.8%. Net profit attributable to shareholders is estimated between RMB 520 million and RMB 580 million, down 56.1% to 60.6% year-on-year. Adjusted net profit is forecast between RMB 520 million and RMB 580 million, a decrease of 65.5% to 69.0% compared to the previous year. For the second half of 2025 (H2), revenue is expected to be RMB 1.05 billion to RMB 1.20 billion, down 59.0% to 64.1% year-on-year. Net profit attributable to shareholders is projected between a loss of RMB 50 million and a profit of RMB 10 million, compared to a profit of RMB 570 million in H2 2024. Adjusted net profit for H2 is estimated to be between a loss of RMB 30 million and a loss of RMB 90 million, versus a profit of RMB 660 million in the same period last year.
The focus is on alleviating pressure on main products, accelerating balance sheet clearance. According to the performance forecast, the company's H2 2025 balance sheet showed significant pressure relief, with revenue declining 59.0% to 64.1% year-on-year and Non-GAAP net profit turning negative. The profit performance was below previous expectations, primarily due to the company's focus on channel destocking during industry pressure. By product, the main products Zhen Thirty and Zhen Fifteen were significantly impacted by weakened consumption scenarios. The company reduced shipments to alleviate channel pressure and rationally increased expense allocations to subsidize distributors, easing cash flow pressures; the decline for these products is expected to be greater than the overall average. The newer product Zhen Ten, being rolled out, is expected to perform better than the overall average. The strategic new product Da Zhen, through its innovative Ten-Thousand Merchant Alliance model, recruited over 3,800 merchants for the full year and accumulated approximately RMB 600 million in collections since its June launch. For other brands, Li Du focused on pressure relief in H2 2025, while Xiang Jiu and Kai Kouxiao also underwent adjustments. Overall, in the second half, despite scenario impairments, Zhen Jiu's main products focused on adjustment and pressure relief, while Da Zhen continued its efforts to establish a new growth pole.
Da Zhen continues to build momentum, with ongoing adjustments planned for 2026 to respond to the market. Looking at 2026, the company's operations primarily hinge on three strategic drivers. First, continuing to advance Da Zhen merchant recruitment. As the company's flagship major product, Da Zhen's recruitment is conducted through the Ten-Thousand Merchant Alliance format, supplemented by an alliance merchant payment plan. The number of alliance merchants is expected to exceed 6,000 for the full year. Second, continuously optimizing channel inventory. Pressure on the main products Zhen 30 and Zhen 15 remains significant. The company is conducting buybacks in some high-inventory regions to foster a healthier market order and achieve more thorough clearance of main products. Third, increasing investment in sub-premium and lower-priced products to deepen penetration in lower-tier markets and enhance market share in banquet scenarios such as weddings, birthday celebrations, and academic success banquets.
Da Zhen represents an innovation model, with current recruitment progress being relatively healthy. Under demand pressure in 2025, the company accelerated balance sheet clearance and proactively alleviated pressure on distributors, building strength for the new year. The report suggests that ZJLD has demonstrated bold innovation amid industry challenges, attracting distributors through the Ten-Thousand Merchant Alliance and the alliance merchant payment plan. Chairman Wu Xiangdong, with his years of experience in the baijiu industry, is committed to establishing Da Zhen as a super product, operating it with extreme prudence. The company imposes strict penalties and criticism on clients who violate agreements by selling Da Zhen improperly. Furthermore, to ensure healthy market operation, the company has temporarily halted recruitment in certain regions to protect brand value. Currently, the recruitment layout for Da Zhen is progressing smoothly, with relatively considerable incremental contributions to the financial statements. This new model is expected to help counter cyclical adjustments.
Risk warnings include a slowdown in consumption recovery, intensifying competition in the sauce-aroma baijiu industry, and Da Zhen merchant recruitment falling short of expectations.
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