Initiating Coverage on Luzhou Laojiao; Riding on Sector Tailwinds Amid Premiumization

Luzhou Laojiao, founded in 1955 from a group of 36 ancient brewing workshops dating back to the Ming and Qing dynasties, is now one of the top three premium baijiu distillers in China. As the original rich-flavored baijiu distiller, the company enjoys a rich legacy that few other baijiu producers have. We believe Laojiao’s hard-to-replicate aged cellars, classic brewing technique, and centuries of history of producing quality products have established a strong competitive advantage in brand strength and pricing power. Its extensive distribution network and deepening cooperation with distributors have also fortressed its competitiveness, allowing it to generate economic profits well into the future.