CICC: Maintaining Zhenjiu Li Du (06979)'s “outperforming the industry” rating, the target price of HK$11.2 is optimistic about the results of the channel model reform

The Zhitong Finance App learned that CICC released a research report saying that maintaining Zhenjiu Li Du (06979)'s “outperforming the industry” rating and target price of HK$11.2 corresponds to the adjusted price-earnings ratio of 2026 and 2027, respectively. There is 42% room for improvement compared to the current stock price. The bank maintained the company's adjusted profit forecasts for 2026 and 2027 at $920 million and $1.17 billion, respectively. The company recently shared detailed operation strategies in areas such as deep cultivation of rare wine regions, channel management, product cultivation and brand communication at the Investor Exchange Day. The bank believes that the market conditions for Dazhen and Zhen15 are gradually improving under the new model, and that products such as Zhen 30, Zhen8, and Lao Zhen Liquor have been adjusted one after another, and are also expected to be repaired ahead of the industry.

CICC's main views are as follows:

Cohesion to strengthen base market penetration and strive for refinement of front-end operation strategies

The company plans to strengthen core market coverage in 2026. Among them, the base base in Guizhou Province is steadily improving, and sales have achieved double-digit growth since the beginning of the year. The core work includes the following three aspects:

1) In terms of network construction, the company has carried out comprehensive mapping and documentation of channel customers, and carried out targeted visits and nurturing. It is successively establishing 7 Dazhen Wanshang Alliances, more than 5,000 Jiazhen 15 group buyer networks and 500 banquet partners, and matching corresponding business support plans for different channel categories. At the same time, the company selected 34 key counties and districts and used Zhen 15 as an entry point to push for a breakthrough.

2) In terms of communicating core scenarios, the company collaborated with partners to launch localized short video promotions, and carried out a series of activities around events such as Dragon Boat Festival, Guizhou Village Super Market, intangible heritage public welfare, fireworks and snacks, etc., which can arouse consumers' sympathy.

3) In terms of cultivating core consumers, the company sorts out demand-side market capacity and supply-side high-quality network resources through a dual radar system, and segmentation strategies to match different needs of different groups of people. Standard operating procedures (SOP) for banquets and tastings are also continuously refined and iterated.

The renewal of the Dazhen Wanshang Alliance progressed smoothly, and the reform of the Zhen 15 Alliance business model also had good results

Dazhen has been on the market for more than a year. Currently, the market price remains stable. The national dealer task renewal rate has reached 80%-85%, and the group growth rate in Guizhou Province has reached 40%.

On the one hand, the company uses a dual radar system to rationally evaluate merchant potential, strictly control entry thresholds, and promptly optimize contractors' struggling sales to ensure the quality of channel completion. On the other hand, through measures such as regional classification and increasing the frequency of rebate payments, the company strengthens the protection of the interests of allied companies and enhances the efficiency of channel operation and transformation.

Empowered by the alliance model, Zhen15's channel profit can increase to 40 yuan/bottle, driving the number of subscribers in Guizhou, Henan, and Guangdong to buck the trend.

Model innovation continues to show results, and is determined to forge ahead

Since 2025, in the face of declining industry demand and channel inventory backlog, the company has resolutely repurchased and removed inventory and innovated the channel model. The bank believes that the determination and adaptability of the company's reforms and adjustments is significantly stronger than that of most wine companies.

Currently, the market status of Dazhen and Zhen15 is gradually improving under the new model. Products such as Zhen 30, Zhen8, and Lao Zhen Liquor have been adjusted one after another, and it is expected that they will be repaired ahead of the industry.

Profit forecasting and valuation

CICC maintained the adjusted profit forecasts for Zhenjiu Li Du in 2026 and $1.17 billion, respectively, and maintained a target price of HK$11.2, corresponding to the adjusted price-earnings ratios of 41 times and 33 times for 2026 and 2027, respectively. The current stock price corresponds to the adjusted price-earnings ratio for 2026 and 2027, respectively, and the target price has 42% upside compared to the current stock price. The bank maintained a “outperforming the industry” rating.

Risk Alerts

Sales of core products fell short of expectations; the recovery of the commercial consumption scenario fell short of expectations.