Core Viewpoint - The Chinese liquor industry, particularly the baijiu sector, is experiencing a significant downturn characterized by declining prices, increased inventory, and shifting consumer preferences, indicating a deep adjustment phase rather than a temporary fluctuation [4][15][22]. Industry Overview - The baijiu industry is facing a dual decline in both volume and price, with a reported production volume of 191.59 million kiloliters in the first half of 2025, a year-on-year decrease of 5.8% [5]. - Approximately 60% of liquor companies are experiencing price inversion, where actual market prices fall below manufacturer guidance, particularly affecting the 800-1500 yuan price range [5]. - The average inventory turnover days for the industry reached 900 days in the first half of 2025, a 10% increase year-on-year, indicating a significant slowdown in sales [11]. Company Performance - Major companies like Moutai and Wuliangye are showing signs of slowing growth, with Moutai's revenue growth target for 2025 set at 9%, the lowest since 2016 [17]. - Wuliangye's revenue for the first half of 2025 was 527.71 billion yuan, with a year-on-year growth of only 4.19% [17]. - Liquor companies are increasingly resorting to price cuts to manage high inventory levels, creating a downward pressure on prices [12]. Consumer Trends - The primary consumer demographic for baijiu is undergoing a generational shift, with younger consumers (born after 1995) showing diverse preferences for alcoholic beverages, including wine and craft beer [24]. - Health consciousness among younger consumers is changing drinking habits, leading to a decline in traditional drinking culture [25]. - The rise of new sales channels, such as e-commerce and community group buying, is disrupting traditional distribution models and further compressing profit margins for liquor companies [25]. Market Opportunities - Despite the challenges, there are emerging structural opportunities in the market, particularly in the lower price segments (100-300 yuan) where demand is shifting [26]. - The focus on family and friend gatherings as primary consumption scenarios is creating new opportunities for products that cater to these social settings [33]. - Companies that can adapt to these changes by enhancing their product offerings and marketing strategies are likely to survive and thrive in the long term [26].

Core Insights - Kouzi Jiao is undergoing significant reforms as it faces its toughest challenges since 2020, with a notable decline in revenue and profit [2][3] Financial Performance - In the first half of the year, Kouzi Jiao reported revenue of 2.531 billion yuan, a year-on-year decrease of 20.07%, and a net profit of 715 million yuan, down 24.63% [2] - The second quarter saw revenue drop to 721 million yuan, a staggering 48.48% year-on-year decline and a 60.17% decrease from the previous quarter [3] - The gross profit margin fell to 65.2%, down 9.9 percentage points year-on-year and 3.3 percentage points from the first quarter [3] - Operating cash flow showed a net outflow of 210 million yuan in the second quarter, contributing to a total outflow of 383 million yuan in the first half [3] Market and Product Challenges - The company is experiencing a structural decline, with a shift towards lower-end products weakening revenue [4] - High inventory levels and price discrepancies are pressuring profits, with a significant portion of high-end products selling below their suggested retail price [5][6] - As of the second quarter of 2025, inventory reached a historical high of 6.159 billion yuan, with over 60% being semi-finished products [6] Market Distribution and Strategy - In the first half of 2025, revenue from the domestic market was 2.101 billion yuan, down 19.31%, while revenue from the external market was 384 million yuan, down 19.24% [7] - The company’s over-reliance on the domestic market poses risks, as its revenue share from this market decreased significantly [7] - Efforts to expand into external markets have stalled, with revenue remaining stagnant at around 400 million yuan for three consecutive years [7] Management and Future Outlook - Concerns have been raised regarding the reduction of shares by the controlling shareholder, which may reflect internal caution about future performance [8] - Despite challenges, the company is focusing on enhancing direct sales channels, with a 44.57% increase in revenue from direct sales in the first half of the year [8] - The company aims to maintain strategic focus on market, structural, and brand upgrades to navigate the evolving competitive landscape [8]

Core Insights - The report highlights the performance pressure in the liquor industry, particularly in the first half of 2025, with a focus on the upcoming festive season as a potential opportunity for investment [1][2][3] Performance Summary - In the first half of 2025, the liquor industry experienced a revenue decline of 0.8% year-on-year, totaling 241.42 billion yuan, with the second quarter seeing a more significant drop of 4.9% to 88.06 billion yuan due to policy impacts [9][10] - High-end liquor maintained growth with a revenue increase of 6.2% in the first half and 3.4% in the second quarter, while mid-tier and regional brands faced substantial declines, with some experiencing drops as severe as 31.1% [10][12] - The overall net profit for the liquor industry decreased by 1.18% in the first half and 7.5% in the second quarter, indicating a challenging environment for profitability [20][28] Short-term Strategy - The report suggests focusing on the upcoming festive season, with expectations of improved sales performance despite ongoing pressures [2][3] - It emphasizes the need for liquor companies to balance market share and structural upgrades while managing pricing and sales dynamics [2][3] Long-term Outlook - The liquor index shows a strong correlation with the Producer Price Index (PPI), with a potential turning point noted in August 2025, which could signal a recovery phase for the industry [2][3] - The report indicates that the liquor sector possesses high return on equity (ROE) and dividend characteristics, with valuations currently positioned in the mid-to-lower range of the industry [2][3] Investment Recommendations - The report recommends focusing on brands that are expected to perform well during the festive season, including high-end brands like Guizhou Moutai and Shanxi Fenjiu, as well as mid-tier brands like Zhenjiu Lidong and Luzhou Laojiao [3][4] - It suggests that the current market conditions may present a buying opportunity as the industry approaches a potential bottom in performance expectations [3][4]

Core Viewpoint - The launch of the "Ancient Cellar Yuanmingqing" series by Kouzi Jiao represents a blend of traditional craftsmanship and modern consumer needs, aiming to elevate the white liquor market with high-quality products at accessible prices [1][10]. Product Quality and Heritage - The "Ancient Cellar Yuanmingqing" series is rooted in the historical Yuanming old cellar group, which has been producing liquor for over 700 years, creating a unique micro-ecological system that contributes to its exceptional taste [3]. - The series is recognized with three significant national accolades: "National Geographical Indication Product," "National Standard Setter for Mixed Aroma Liquor," and "National Industrial Heritage Cellar Brewing," establishing a strong competitive barrier [3]. Pricing Strategy - The product is strategically priced between 100-300 yuan, offering "superior quality at benchmark prices," which positions it within the core consumer segment of the white liquor market [5]. - The series aims to provide a rich flavor experience that exceeds expectations for its price range, promoting a "value surpassing price" consumption upgrade [5]. Marketing and Promotion - A live streaming event in collaboration with JD Supermarket will take place on September 24, featuring cultural experiences, tasting opportunities, and promotional offers, including significant discounts and interactive activities [6][7]. - The event will include a special appearance by brand ambassador Wang Jianxin, who will share insights into the series and its unique flavor profile [7]. Cultural Integration - The brand is producing a micro-documentary titled "Seeking Fragrance in Ancient Cellars," featuring Wang Jianxin, to showcase the heritage and complexity of the brewing process, reinforcing the series' positioning as a benchmark for quality in the market [8][10]. - The initiative aims to merge 700 years of ancient cellar culture with modern consumer demands, allowing traditional brewing culture to resonate with contemporary lifestyles [10].

Group 1 - The food and beverage sector experienced a decline on September 18, with the Food ETF (515710) dropping by 0.63% [1] - Within the sector, liquor stocks were notably weak, with companies like Yingjia Gongjiu falling over 2% and others like Jiu Gui Jiu and Lu Zhou Lao Jiao declining more than 1% [1] - Despite the current downturn, some analysts suggest that the liquor sector may have entered a bottoming phase, with potential for recovery during the upcoming festive season [1][4] Group 2 - According to Open Source Securities, the retail sales growth rate has slowed down, primarily due to diminishing effects of the "old-for-new" policy and a gradual recovery in consumer demand [3] - The food and beverage sector is expected to benefit from improving macroeconomic conditions and rising consumer income and willingness to spend [3] - The current valuation of the food and beverage sector is at a low point, making it a potentially good time for investment [3] Group 3 - Future outlook indicates that the liquor sector is undergoing adjustments due to policy impacts, with a noticeable decline in demand [4] - There are signs of recovery in consumer behavior, particularly in personal drinking and social gatherings, which could lead to improved sales figures [4] - Analysts predict that the worst phase for the liquor sector has passed, and there is cautious optimism for the upcoming Mid-Autumn Festival and National Day [4] Group 4 - The Food ETF (515710) tracks the CSI segmented food and beverage industry index, with a significant portion of its holdings in leading high-end liquor stocks [5] - Investors can also access core assets in the food and beverage sector through the Food ETF linked funds [5]

Investment Rating - The report suggests a recommendation for strong brands such as Guizhou Moutai, Wuliangye, and Luzhou Laojiao, as well as Shanxi Fenjiu, which has a clear growth path in a counter-cyclical environment [5]. Core Insights - The industry is currently in a phase of accelerated bottoming, transitioning from "passive clearing" to "active adjustment" due to ongoing pressures from excess supply and demand scenarios [3][5]. - The first half of 2025 saw a negative growth in revenue and net profit for major liquor companies, marking the first negative growth in this cycle [15]. - The report highlights a structural opportunity during the volume adjustment period, with market pricing increasingly favoring dividend yield and market share [3][5]. Summary by Sections Industry Overview - The white liquor industry faced challenges in the first half of 2025, including slow macroeconomic recovery and strict alcohol prohibition policies, leading to a decline in consumption scenarios and continued pressure on demand [5]. - The overall revenue and net profit for 17 major liquor companies were 2368.3 billion and 944.6 billion respectively, with a year-on-year decline of 0.4% and 0.9% [15]. Performance Analysis - In Q2 2025, the revenue and net profit for the industry were 867.2 billion and 313.4 billion respectively, reflecting a year-on-year decline of 4.7% and 7.3%, marking the first negative growth in revenue during this cycle [15]. - High-end liquor maintained positive growth, while the mid-range and regional brands experienced declines [20][22]. Market Dynamics - The report indicates that the market is shifting focus from short-term recovery scenarios to verifying the bottom of demand trends through year-on-year comparisons [3]. - The report anticipates a recovery in the third quarter, driven by seasonal consumption events such as Mid-Autumn Festival and National Day, which may accelerate the bottoming process of the fundamentals [5]. Investment Recommendations - The report recommends focusing on brands with strong market positions and growth potential, including Guizhou Moutai, Wuliangye, Luzhou Laojiao, and regional leaders like Guyi Gongjiu and Jinhui Jiu [5].

Group 1 - The liquor concept sector experienced a decline of 1.19% as of the market close on September 17, ranking among the top declines in concept sectors [1] - Within the liquor sector, stocks such as Yiatong, Kweichow Moutai, and Wuliangye saw significant net outflows of main funds, with Yiatong leading at a net outflow of 3.91 billion yuan [2][3] - Conversely, stocks like Kouzi Jiao and Jihong Co. saw net inflows of main funds, with Kouzi Jiao receiving 98.33 million yuan [2][4] Group 2 - The top gainers in the liquor sector included Jihong Co. with an increase of 4.06%, Kouzi Jiao with 2.98%, and Huachuang Yunxin with 0.92% [1][4] - The main funds saw a net outflow from 39 stocks in the liquor sector, with six stocks experiencing outflows exceeding 100 million yuan [2] - The overall market sentiment in the liquor sector appears negative, as indicated by the significant outflows and the majority of stocks declining in value [2][3]

Core Viewpoint - The stock of Kuozi Jiao has shown fluctuations with a recent increase of 2.08%, but it has experienced a year-to-date decline of 7.99% [1] Group 1: Stock Performance - As of September 17, Kuozi Jiao's stock price reached 34.91 CNY per share, with a market capitalization of 20.88 billion CNY [1] - The stock has seen a net inflow of 28.75 million CNY from major funds, with significant buying and selling activities [1] - Over the past five trading days, the stock has increased by 1.54%, while it has decreased by 1.38% over the last 20 days [1] Group 2: Financial Performance - For the first half of 2025, Kuozi Jiao reported a revenue of 2.531 billion CNY, a year-on-year decrease of 20.07%, and a net profit of 715 million CNY, down 24.63% [2] - Cumulative cash dividends since the A-share listing amount to 6.919 billion CNY, with 2.577 billion CNY distributed over the last three years [3] Group 3: Shareholder Information - As of June 30, 2025, the number of shareholders for Kuozi Jiao was 71,900, a decrease of 6.70% from the previous period [2] - The average number of circulating shares per shareholder increased by 7.18% to 8,313 shares [2] - The third-largest circulating shareholder is the Zhao Shang Zhong Zheng Bai Jiu Zhi Shu A, holding 29.6216 million shares, an increase of 3.8228 million shares from the previous period [3]

Core Viewpoint - The company reported a significant decline in revenue and net profit for the first half of 2025, indicating challenges in the high-end liquor market and overall industry adjustments [1][2][3]. Financial Performance - In H1 2025, the company achieved revenue of 2.531 billion yuan, a year-on-year decrease of 20.07%, and a net profit attributable to shareholders of 715 million yuan, down 24.63% [1]. - For Q2 2025, revenue was 721 million yuan, reflecting a substantial year-on-year decline of 48.48%, with net profit dropping to 105 million yuan, a decrease of 70.91% [1]. Product Performance - Revenue from high-end, mid-range, and low-end liquor in H1 2025 was 2.385 billion yuan, 32 million yuan, and 68 million yuan, respectively, with year-on-year changes of -19.8%, -10.8%, and -2.6% [2]. - In Q2 2025, revenue from high-end, mid-range, and low-end liquor was 657 million yuan, 12 million yuan, and 29 million yuan, with year-on-year changes of -49.6%, -7.7%, and +7.5%, respectively [2]. Regional and Channel Analysis - H1 2025 revenue from domestic and external markets was 2.101 billion yuan and 384 million yuan, with year-on-year changes of -19.3% and -19.2% [2]. - In Q2 2025, domestic and external revenue was 515 million yuan and 183 million yuan, with year-on-year changes of -54.0% and -18.6% [2]. - Direct sales (including group purchases) and wholesale agency revenue in H1 2025 were 133 million yuan and 2.352 billion yuan, with year-on-year changes of +44.6% and -21.3% [2]. Profitability and Cost Structure - The gross margin for Q2 2025 was 65.18%, a decrease of 9.86 percentage points year-on-year, primarily due to reduced revenue from high-end liquor and an increase in low-margin products [3]. - The net profit margin for Q2 2025 was 14.51%, down 11.18 percentage points year-on-year [3]. Strategic Focus - The company aims to maintain strategic focus during the industry adjustment period by enhancing market presence, structural improvements, and brand upgrades, while also investing in smart and digital transformation [3]. - Efforts include deepening the domestic market, expanding in key regions like the Yangtze River Delta, and actively developing e-commerce and digital marketing [3]. Investment Outlook - Revenue growth rates are projected to be -21.0% for 2025, +4.3% for 2026, and +7.0% for 2027, with net profit growth rates of -28.6%, +7.2%, and +7.3% respectively [4].

Core Viewpoint - The company reported a significant decline in revenue and net profit for the first half of 2025, indicating challenges in the high-end liquor market and increased competition in the industry [1] Financial Performance - In H1 2025, the company achieved operating revenue of 2.531 billion yuan, a year-on-year decrease of 20.07% [1] - The net profit attributable to shareholders was 715 million yuan, down 24.63% year-on-year [1] - The net profit after deducting non-recurring items was 698 million yuan, reflecting a decrease of 24.90% year-on-year [1] Product Segment Analysis - Revenue from high-end, mid-range, and low-end liquor in H1 2025 was 2.385 billion yuan, 32 million yuan, and 68 million yuan, respectively, with year-on-year changes of -19.8%, -10.8%, and -2.6% [1] - In Q2 2025, revenue for high-end, mid-range, and low-end liquor was 650 million yuan, indicating continued pressure on mid to high-end products [1] Profitability and Margin - The company's gross margin in Q2 2025 was 65.18%, a decrease of 9.86 percentage points year-on-year, primarily due to reduced revenue from high-end liquor and an increase in the proportion of low-margin products [1] - The industry is currently undergoing a deep adjustment period, characterized by inventory destocking and price competition [1] Investment Outlook - The company forecasts revenue growth rates of -21.0%, +4.3%, and +7.0% for the years 2025 to 2027, with net profit growth rates of -28.6%, +7.2%, and +7.3% respectively [1] - Based on the average valuation of comparable companies, a "Buy-A" investment rating is suggested for 2025 [1]