Shun Xin Agriculture (000860) Company Updates: Incorporating Downgrades Favors Liquor Business

Shun Xin Agriculture (000860) Company Updates: Incorporating Downgrades Favors Liquor Business
The company’s recent government work report proposed that the interest rate increase of 16% and 10% be reduced to 13% and 9%. The liquor industry can benefit from the reduction of 3 tax points and the company’s liquor business can benefit. Commentary We expect the tax reduction to improve the profitability of the liquor business to a certain extent, but we predict that the company will allocate the saved costs to the dealers, and we estimate that the company will actually benefit from 2 tax points.According to our calculations, if the company’s 南京夜生活网 liquor business actually benefits 1/2/3 tax points respectively, and the previous sales volume is unchanged, the non-tax income of the liquor business in 2019 can increase by 0 respectively.9/1.8/2.7%, liquor gross profit increased by 1.6/3.2/4.9%, the boots led to the company’s net profit increased by 3 respectively.8/7.7/11.7%, the net interest rate increased by 0.4/0.7/1.1%.We predict that the company will share the profit brought by the downward adjustment with downstream distributors. At the same time, because of the company’s strong brand and higher bargaining power, we expect the company to actually benefit from 2 tax points. The Niulanshan country still has plenty of room for heavy volume, and maintains high growth in many places. We expect that the revenue of liquor business in 2019 will reach 11.7 billion, and sales 南宁桑拿 will reach 76 tons. In the future, it will continue to integrate the 1,000-ton low-end wine market with high cost performance.Looking ahead to 2019, we predict that Niulanshan will maintain a high growth rate of more than 30% in the southern market, mainly from the expansion of consumer groups and the promotion of cost-effectiveness of mass consumption.At present, Niulanshan only accounts for 5% of the market share of the low-end liquor market, and integration has just begun.Among them, the aging price of 15 yuan is stable and endorsed by Niulanshan brand, which can fully grasp the upgrade of mass consumers.We expect the aging wine revenue in 2019/20 to grow 33/30% to 69/90 trillion per year, accounting for 59/63% of the company’s liquor business revenue. At the same time, through the replacement of non-alcoholic business, we expect the company’s profitability to have a one-time release opportunity, and the scale effect can also bring down the expense ratio and further improve profitability. Estimates suggest that as the company actually benefits from the increased tax cuts unknown, we maintain our profit forecast and target price unchanged, with target prices corresponding to 2019 / 20e 25/17 respectively.6X P / E, now corresponding to 2019 / 20e 18/12.The price-earnings ratio is 6 times, and the target price has 39% upside. Maintain the recommended level. Risks If the macroeconomic downturn, sales may not meet expectations.