Goldman Sachs Raises CICC LD Earnings Forecasts, Maintains Neutral Rating

Overview

Goldman Sachs released a research report upgrading CICC LD's (6979.HK) revenue and adjusted net profit forecasts for 2026-2028 by 1-4% and up to 1.5%, respectively. Key drivers include stronger-than-expected performance of core brands: robust momentum of 'Da Zhen,' solid recovery of 'Zhen15,' and successful national expansion of 'Li Du.' Although near-term earnings remain pressured by low comparables, a rebound is expected in the second half. Accordingly, Goldman Sachs raised the target price from HK$7.0 to HK$7.2 while maintaining a 'Neutral' rating.

Core views

Brand performance is divergent but overall positive. 'Da Zhen' emerges as a new growth engine: As of H1 2026, Da Zhen's sales reached approximately RMB 400 million (compared to RMB 30 million in H2 2025 after launch; original data likely reflects cumulative or unit discrepancy, interpreted here as RMB 400 million based on context), with its distributor network expanding rapidly from around 2,000 at end-2025 to over 4,000 by May 2026. Additionally, Da Zhen's gross margin exceeds that of Zhen30, contributing to improved overall profitability. 'Zhen15' stabilizes and recovers: Since channel inventory buybacks in Q4 2025 and improved春节 (Spring Festival) distribution, Zhen15's recovery has exceeded expectations. Inventory digestion of older versions is largely complete; the fifth-generation Zhen15, launched on March 18, targets small-scale group buyers and emphasizes retail distribution. Full-year 2026 H1 revenue for the Zhenjiu brand is expected to decline by ~12%, with Zhen15 posting only single-digit declines, while Da Zhen's incremental sales largely offset the decline in Zhen30 due to shipment controls. Given the low base in H2 2025 (RMB 430 million vs. RMB 1.492 billion in H1), the YoY comparison in H2 2026 will be easier. 'Li Du' national expansion delivers results: The Li Du brand has resumed steady double-digit growth driven by national expansion. Notable progress has been made in provinces such as Shandong and Hebei, where single-province sales have each surpassed RMB 100 million. Financial forecast adjustments: Based on the above brand performance, Goldman Sachs raised its 2026-2028 revenue forecasts by 1-4% and adjusted net profit forecasts by up to 1.5%. Full-year 2026 H1 revenue and net profit are projected to decline by 5% YoY each, followed by a rebound in H2. For the full year, 2026 revenue and net profit are expected to grow 14% and 57% YoY (driven by low comparables), recovering to 59% and 49% of 2024 levels, respectively. Gross margin will benefit from higher contribution of Da Zhen and Li Du, offsetting operational deleveraging, while the company maintains discipline in cost control and channel investment, prioritizing healthy channel inventory levels and distributors with strong distribution capabilities.

Analysis framework

Goldman Sachs employed a top-down brand disaggregation analysis. First, the company's overall performance was segmented into two core pillars: 'Zhenjiu' (including Da Zhen, Zhen15, Zhen30, etc.) and 'Li Du.' Second, for each key SKU, channel inventory changes, distributor network expansion, new product launch cadence, and end-market distribution were tracked to validate the authenticity and sustainability of sales data. Finally, the impact of product mix shifts (higher-margin products gaining share) on gross margin, combined with disciplined expense management, informed the final earnings forecast revisions. This approach emphasizes the critical role of micro-level channel data in supporting macro-level financial projections.

Methodology notes

• Industry/Segment Analysis FrameworkVolume-price decomposition

  Volume-Price Decomposition

  The report analyzes sales volume (distributor count, revenue) and pricing/structure (gross margin comparisons) across brands (e.g., Da Zhen, Zhen15) to decompose the sources of revenue and profit growth, determining whether growth is driven by volume expansion or structural improvement.

• Valuation MethodologyPE/PEG valuation

  PE/PEG Valuation

  The report uses the price-to-earnings (P/E) ratio as the primary valuation anchor, applying a 19.3x multiple to 2027E EPS and discounting to mid-2027 to derive the target price. This is a common relative valuation approach for consumer companies.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CICC LD (6979.HK)

  Direct beneficiary; core brand recovery and new product expansion drive earnings upgrades

  Strengths

  Rapid distributor expansion for Da Zhen; successful national rollout of Li Du; product mix shift improves gross margin

  Weaknesses

  H1 earnings still decline YoY; legacy products like Zhen30 face shipment controls and sales pressure

  Risks

  Intensifying competition in mid-to-high-end segment; impact of banquet consumption policies; new product adoption below expectations

Key data

• 2026-2028E Revenue Forecast Upgrade1-4%Primarily driven by stronger-than-expected core brand performance
• 2026-2028E Adjusted Net Profit Forecast UpgradeUp to 1.5%Driven by revenue upgrades and higher gross margins from Da Zhen's product mix shift
• 2026E Revenue/Net Profit Growth Forecast14% / 57%Based on low comparables, recovering to 59%/49% of 2024 levels
• Da Zhen H1 2026 SalesApprox. RMB 400 millionDistributor count rose from ~2,000 at end-2025 to over 4,000 by May 2026
• Target PriceHK$ 7.2Previously HK$7.0, based on 19.3x 2027E P/E

Impact & implications

The report concludes that CICC LD's brand portfolio restructuring is taking effect, with the high-growth and high-margin characteristics of 'Da Zhen' and 'Li Du' gradually offsetting the decline of legacy products. Although H1 2026 earnings remain under pressure, an easier YoY comparison in H2 and continued new product ramp-up will drive a rebound. Investors should monitor whether the company can maintain healthy channel inventory and stable end-market distribution while expanding its distributor network.

Risks

• Intensity of competition in the mid-to-high-end segment may exceed or fall short of expectations
• Timing of impact from banquet consumption policies may be shorter or longer than anticipated
• New product launches and market adoption may outperform or underperform expectations

What to watch

• Subsequent distribution performance and channel inventory levels for Da Zhen and Li Du
• Retail market reception of the fifth-generation Zhen15 product
• Strength of revenue and net profit rebound in H2