In the novel, he tells of the life of the Manchurians in the late Qing Dynasty (1644-1911).
Sun Dongxing, director of the troupe, says: "The greatness of Lao She lies in his deep understanding and portrayal of human nature as well as traditional Beijing culture. There is always something connected to our lives through his works."
Sun adds that every year the company celebrates Lao She's birthday on Feb 3 by performing his works during the Spring Festival.
The writer committed suicide during the "cultural revolution" (1966-76).
Sun also says that the company will mainly use young Quju opera actors in Beneath the Red Banner.
Besides the two works adapted from Lao She's novels, the troupe also plans to present Huang Ye Hong Lou, a Quju opera developed by the company in 2013.
It tells the story of Cao Xueqin, a Chinese writer during the Qing Dynasty, who produced his best work, A Dream of Red Mansions, from Beijing's Huangye village, which is located at the base of the Fragrant Hills.
The opera has been performed more than 50 times and has won national awards.
Nowadays, many voices lament the decline of traditional Chinese art forms, such as Peking Opera and other local folk operas, including Beijing's Quju. But 20 years ago, the company was on the verge of dying because of a paucity of young talent and lack of commercial viability.
However, thanks to Snuff Bottles, a Quju opera work by composer Dai and scriptwriter Zhang Yonghe, the company not only survived but also drew audiences back.
The show, which tells of the miserable life of a skilled craftsman who would rather cut off one of his arms than make a snuff bottle bearing the image of a foreign invader, has been performed nearly 400 times and has been viewed by around 170,000 people.