Core Viewpoint - Shede Liquor is facing significant challenges including declining performance, channel imbalances, and tightening cash flow, raising questions about its ability to continue its national expansion strategy amidst a "not-so-strong peak season" [2][3]. Financial Performance - In the first three quarters of 2025, Shede Liquor reported revenue of 3.702 billion yuan, a year-on-year decrease of 17%, and a net profit of 472 million yuan, down 29.43% [3]. - The third quarter alone saw revenue of 1 billion yuan, a decline of 15.88%, and a net profit of 28.73 million yuan, plummeting 63.18%, marking the lowest quarterly profit since 2016 [3]. - The company’s cash flow from operating activities was -244 million yuan, a drop of 69.47%, with a net outflow of 312 million yuan in the third quarter [4]. Market Dynamics - Despite the overall decline, Shede Liquor's main product, T68, saw a sales increase of 16.46%, and e-commerce sales grew by 39.62% [10]. - However, the high-end liquor segment experienced a revenue drop of 23.96%, while ordinary liquor revenue increased by 16.46% [10]. - The overall gross margin fell to 64.73%, down 4.67 percentage points year-on-year, and the net profit margin decreased to 12.69% [10]. Distribution Challenges - The company has seen a significant exit of distributors, with 461 leaving this year, surpassing the total for 2024 [2][9]. - As of the end of the third quarter, the total number of distributors was 2,554, a decrease of 109 from the previous year [15]. - Inventory levels have risen, with a balance of 5.677 billion yuan at the end of the third quarter, an increase of 460 million yuan since the beginning of the year [16]. Management and Strategy - Since becoming controlled by the Fosun Group in late 2020, Shede Liquor has experienced frequent management changes, with over 20 high-level personnel changes in four years [18]. - The company has shifted its strategic focus multiple times, from high-end liquor to mass-market expansion, leading to instability in its long-term strategy [19]. - The management has announced plans to focus on "de-stocking, stabilizing prices, and promoting sales," while also leveraging e-commerce and live retail channels [20]. Regulatory and ESG Concerns - The company has faced scrutiny from regulators regarding the rationale behind significant investments in expansion amid declining revenues and production capacity [7]. - There have been controversies surrounding land acquisition and compensation issues related to its expansion projects, raising questions about the company's ESG practices [8].

Core Viewpoint - Shede Liquor's stock has shown significant price movements recently, with a year-to-date increase of 4.40% and a notable rise of 14.63% over the past five trading days, indicating positive market sentiment despite a decline in revenue and profit [1][2]. Financial Performance - For the period from January to September 2025, Shede Liquor reported a revenue of 3.702 billion yuan, representing a year-on-year decrease of 17.00%. The net profit attributable to shareholders was 472 million yuan, down 29.43% compared to the previous year [2]. - Cumulative cash dividends since the company's A-share listing amount to 2.29 billion yuan, with 1.353 billion yuan distributed over the last three years [3]. Shareholder Information - As of September 30, 2025, the number of shareholders for Shede Liquor was 114,400, a decrease of 11.81% from the previous period. The average number of circulating shares per shareholder increased by 13.39% to 2,908 shares [2]. - The top ten circulating shareholders include significant institutional investors, with the second-largest being the China Securities White Liquor Index A, holding 16.4538 million shares, unchanged from the previous period [3].

Core Insights - The company is focusing on traditional advantageous markets such as Sichuan, Hebei, Shandong, and Northeast China, while continuing to promote national brand expansion [1] - The company is enhancing its market penetration through channel downscaling and C-end operations, aiming to create "small regions with high market share" [1] - E-commerce sales have seen a significant increase, with a year-on-year growth of 39.62% in the first three quarters [1] Group 1 - The company reported a 16.46% year-on-year increase in ordinary liquor sales revenue, reaching 625 million yuan, driven by the strong performance of its strategic flagship product, T68 [1] - The company is actively exploring new consumption scenarios and expanding its consumer base through innovative marketing strategies, including online launches and offline promotional events [2] - The company is leveraging emerging channels such as live streaming and instant retail to enhance its e-commerce sales proportion [1] Group 2 - The new product "Shide Zizai" is primarily launched through online channels, utilizing traditional fast-moving consumer goods marketing strategies to quickly validate target demographics and pricing [2] - The product is positioned to cater to various social consumption scenarios, including casual gatherings and home consumption, reflecting a focus on emotional and relaxed social experiences [2]

Core Insights - The company is focusing on traditional advantageous markets such as Sichuan, Hebei, Shandong, Henan, and Northeast China while continuing to promote national brand expansion [1] - The company aims to enhance market penetration in key cities through channel deepening and C-end operations, targeting "small regions with high market share" [1] - E-commerce sales have seen a significant increase of 39.62% year-on-year in the first three quarters of this year, driven by the company's "Internet Re-Launch" strategy [1] Market Strategy - The company is actively expanding in South China and East China, which are expected to contribute new growth points [1] - The strategic focus on the flagship product, T68, has resulted in a 16.46% year-on-year increase in ordinary liquor sales revenue, reaching 625 million [1] - The company is leveraging online channels for the launch of its new product, "Shede Zizai," which targets various consumption scenarios and aims to explore new consumer bases [1]

Market Overview - The liquor sector experienced a decline of 0.18% on November 11, with Shui Jing Fang leading the drop [1] - The Shanghai Composite Index closed at 4002.76, down 0.39%, while the Shenzhen Component Index closed at 13289.0, down 1.03% [1] Individual Stock Performance - Shede Liquor (600702) rose by 2.56% to a closing price of 67.31, with a trading volume of 319,700 shares and a transaction value of 2.144 billion [1] - Gujing Gongjiu (000596) increased by 0.92% to 164.00, with a trading volume of 37,400 shares and a transaction value of 606 million [1] - Shui Jing Fang (600779) fell by 1.13% to 42.87, with a trading volume of 48,200 shares and a transaction value of 206 million [2] - Moutai (600519) decreased by 0.23% to 1458.99, with a trading volume of 26,700 shares and a transaction value of 3.883 billion [2] Capital Flow Analysis - The liquor sector saw a net outflow of 497 million from institutional investors, while retail investors contributed a net inflow of 244 million [2] - The main capital inflow and outflow for selected stocks showed varied trends, with Shanxi Fenjiu (600809) experiencing a net inflow of 1.06 billion from main capital [3] - Shede Liquor (600702) had a net inflow of 46.2 million from main capital, while it faced a net outflow of 90.1 million from speculative capital [3]

Summary of the Baijiu Industry Conference Call Industry Overview - The Baijiu industry is expected to reach a turning point around the second quarter of 2026, with stock prices typically responding ahead of fundamentals, indicating a current bottoming expectation for the sector, which presents good absolute return potential [1][4] - The industry has undergone six quarters of adjustment, likely to bottom out by the second quarter of 2026, with a subsequent recovery in income and stock prices anticipated [1][13][16] Key Insights and Arguments - The current market structure for Baijiu has significantly changed compared to the 2013-2016 cycle, with increased industry concentration and improved market management capabilities among leading companies [1][3][14] - The wholesale price of Moutai has dropped to 1,650 RMB, which is equivalent to 34 bottles purchasable with the annual income of urban residents, indicating sufficient economic capacity for high-end Baijiu consumption [1][11] - The Baijiu sector is currently under pressure but is expected to enter a phase of recovery as new products and channels contribute to growth, creating a resonance effect between alpha and beta returns [1][5] Future Trends - The Baijiu industry is projected to see a recovery in revenue growth by the second quarter of 2026, with a potential for excess returns compared to the CSI 300 index [13][16] - The rise of sauce-flavored Baijiu and its increasing penetration rate are noted as significant trends, despite recent adjustments in this segment [14][15] Investment Recommendations - Companies are categorized into three main development lines: 1. Those that meet family demand and have competitive advantages in regional markets, such as Jinwei and Gujing [17] 2. Large enterprises with strong brand positions and operational capabilities, like Luzhou Laojiao and Moutai [17] 3. Companies that innovate in products and channels, such as Shede and Li Du, which are exploring new growth points [17] Challenges and Opportunities - Current challenges include inventory buildup and downward pricing pressures across the industry, but a recovery in demand and normalization of inventory levels are expected to lead to a turning point in revenue stabilization [20] - The valuation of Baijiu companies is at historical lows, suggesting significant upside potential once the market recovers, particularly for high-end products that remain in demand [19][21] Conclusion - The Baijiu industry is in a transitional phase, with expectations of recovery and growth in the coming years. The current low valuations present a favorable long-term investment opportunity as the market stabilizes and consumer demand rebounds [19][20]

Core Viewpoint - The consumer sector in A-shares and Hong Kong stocks experienced a significant rise on November 10, driven by multiple positive news releases, with traditional and new consumption sectors showing strong performance, particularly China Duty Free Group reaching a two-year high [1][2][3] Group 1: Market Performance - A-shares saw strong performances in sectors such as liquor, aviation, and duty-free, with notable stocks like China Duty Free Group hitting the daily limit and a total buy order of 5.03 billion yuan [2] - In Hong Kong, stocks like Hou Shang A Yi and Mi Xue Group rose by over 13% and 9% respectively, while Pop Mart increased by over 8% [2] - The consumer sector has been under pressure for several quarters, with the liquor index down approximately 5.45% year-to-date, while the retail index only increased by 0.75% [3] Group 2: Policy and Economic Indicators - The Ministry of Finance announced continued implementation of policies to boost consumption, while the National Bureau of Statistics reported a 0.2% year-on-year increase in the Consumer Price Index (CPI) [3] - The core CPI, excluding food and energy, has seen an expanding growth rate for six consecutive months, indicating a potential recovery in consumer spending [3] Group 3: Fund Management Trends - Public funds have shown a divergence in their operations, with some reducing holdings in traditional consumer stocks like Kweichow Moutai, while others maintain or increase their positions, reflecting differing outlooks on the consumer market [4][5] - The number of funds holding Pop Mart decreased from 286 to 180, with a significant reduction in the number of shares held, indicating a cautious approach towards new consumption stocks [4][5] Group 4: Investment Strategies - Fund managers are focusing on the dual aspects of domestic demand and overseas expansion as key investment themes, believing that the current low valuation levels provide a safety margin for investments [5][6] - There is a growing emphasis on the potential for Chinese brands to expand internationally, particularly in Southeast Asia, Africa, and the Middle East, as companies leverage their domestic market strengths to gain competitive advantages abroad [6]

Market Overview - A-shares showed mixed performance with the Shanghai Composite Index regaining the 4000-point mark, closing up 0.53% at 4018.60 points, while the Shenzhen Component rose 0.18% and the ChiNext Index fell 0.92% [2][3] - The trading volume in the Shanghai and Shenzhen markets reached 21,745 billion, an increase of 1,754 billion from the previous trading day [3] Sector Performance - Traditional sectors such as liquor, tourism, and aviation saw significant gains, with stocks like Shede Liquor and China Duty Free hitting the daily limit, and Kweichow Moutai rising over 2% [2] - In contrast, previously strong sectors like semiconductors and artificial intelligence experienced a collective pullback [2] - Among 31 industry indices, 23 saw gains, with beauty care and food & beverage leading at 3.60% and 3.22% respectively, while the power equipment sector was the only one to decline, falling over 1% [3] Consumer Sector Dynamics - The surge in the consumer sector is attributed to multiple favorable factors, including positive economic signals such as a 0.2% month-on-month and year-on-year increase in the CPI for October, and a 1.2% year-on-year rise in core CPI [4] - The government is expected to continue implementing policies to boost consumption, as indicated in the fiscal policy report for the first half of 2025 [4] - The duty-free sector received a boost from the optimization of Hainan's duty-free shopping policy effective November 1, with a significant event scheduled for December 18 [4] Investment Sentiment - Analysts suggest that A-shares are entering a critical phase of economic verification, with expectations of a volatile upward trend but potentially slower growth rates [5] - There is a growing discussion about style rotation in the market, with high dividend and consumer sectors becoming more attractive to investors [2][5] - The rise of the "old economy" stocks, particularly in the liquor sector, has reignited interest in traditional industries, contrasting with the previously favored "new economy" sectors like technology [6] Market Classification - The terms "old economy," "middle economy," and "new economy" have gained popularity in market discussions, categorizing stocks based on their industry characteristics [6] - Fund managers emphasize the importance of evaluating business models and intrinsic value rather than strictly adhering to these classifications [6] Valuation Concerns - Despite the overall market valuation being reasonable, there are concerns about the high trading density in sectors like artificial intelligence and robotics, which may lead to localized bubbles [7]

Group 1 - The A-share liquor sector experienced a significant rise on November 10, with multiple companies reaching their daily limit up [1] - Shede Liquor and Kweichow Moutai both hit the daily limit, indicating strong investor interest [1] - Other notable performers included Gujing Gongjiu and Shanxi Fenjiu, both rising over 5%, while Yanjing Beer and Huichuan Beer saw increases of over 2% [1]

Core Viewpoint - The A-share liquor sector has experienced a significant rebound, driven by favorable policies, expectations of industry recovery, and positive macroeconomic data [1][3][9]. Group 1: Market Performance - As of November 10, the liquor sector index (BK0896) closed at 2349.92, with a rise of 2.92%, and several stocks, including Shede Liquor and Jiu Gui Jiu, reached their daily limit [1]. - Notable stocks such as Luzhou Laojiao and Gujing Gongjiu saw increases exceeding 6% [1]. - The overall market sentiment has improved, with the consumer sector also witnessing a collective rise, indicating a broader recovery trend [7]. Group 2: Policy and Industry Dynamics - A series of supportive policies have been introduced since late September, focusing on expanding domestic demand and promoting consumption, which has attracted capital to the liquor sector [3]. - The Ministry of Industry and Information Technology has included liquor in the "historical classic industries" category, emphasizing its cultural significance and potential for high-quality development [3]. - Recent policies from Guizhou province aim to shift the liquor industry from merely selling products to offering lifestyle services, indicating a strategic transformation in the sector [4]. Group 3: Financial Performance and Valuation - Despite a challenging third quarter for many liquor companies, the overall resilience of the sector has improved compared to previous downturns, with many companies showing better performance metrics [8][9]. - Analysts note that the valuation and sentiment in the sector are at low levels, which has contributed to the recent price increases [5]. - The presence of institutional investors in the market has been significant, with notable purchases in stocks like Jiu Gui Jiu, indicating renewed interest from larger players [5][6]. Group 4: Inventory and Sales Trends - The upcoming "Double 11" shopping festival is expected to help clear some inventory, although it is viewed as a short-term measure rather than a solution to the industry's deeper issues [10]. - Analysts suggest that while there is a limited recovery expected in the fourth quarter, the overall industry remains in a deep adjustment phase, with varying performance among different companies [14]. - The sales performance of premium products like Feitian Moutai has stabilized, contributing positively to market expectations [12][14].