Zhenjiu Lidu: Initiating Coverage on a Multibrand Baijiu Distiller With a Narrow Moat Rating

We initiate coverage of Zhenjiu Lidu, or ZJLD, with a narrow moat rating and a fair value estimate of HKD 12.20 per share, which implies price/earnings of 20 times, and enterprise value/EBITDA of 12 times, based on our 2024 estimates. We think the shares are currently undervalued, but our preferred picks in the sector are wide-moat Wuliangye and Luzhou Laojiao, as we believe these companies will be resilient despite economic swings, underpinned by their strong brand heritage, supreme product quality, and extensive distribution networks.