Investment Rating - The report maintains a "Positive" investment rating for the liquor industry [10] Core Insights - The liquor inventory cycle is gradually turning, with expectations of a demand recovery driven by ongoing economic policies and improved consumer confidence. The industry is entering a critical phase for left-side layout [2][8] - Current valuations and fund holdings in the liquor industry are at historical lows, indicating a favorable time for allocation. Leading liquor companies are showing strong dividend support [2][8] Summary by Sections Inventory Management - The liquor industry has clear inventory cycle fluctuations, with different phases affecting stock performance. The current phase indicates a shift from passive inventory accumulation to active inventory reduction, suggesting a more scientific and rational management approach by manufacturers [6][20][24] Demand Recovery - The demand for liquor is closely tied to macroeconomic conditions. Historical data shows that liquor industry revenue growth aligns with GDP growth, indicating potential for gradual recovery as the economy improves [36][39] Head Brand Concentration - The trend of market share concentration towards leading brands continues, with top companies maintaining stable growth despite overall market slowdowns. In 2024, listed liquor companies accounted for 28% of the total production, a historical high [42][44] Mid-Autumn Festival Performance Review - Historical performance around the Mid-Autumn Festival shows varying results for liquor stocks compared to the CSI 300 index. The fundamental performance remains the decisive factor for excess returns during this period [49][52]

Market Overview - On September 22, the liquor sector declined by 1.19% compared to the previous trading day, with *ST Rock leading the decline [1] - The Shanghai Composite Index closed at 3828.58, up 0.22%, while the Shenzhen Component Index closed at 13157.97, up 0.67% [1] Individual Stock Performance - The following table summarizes the closing prices, percentage changes, trading volumes, and transaction amounts for key liquor stocks: - *ST Rock: Closed at 6.06, down 3.50%, with a trading volume of 60,500 and a transaction amount of 37.40 million [1] - Shede Liquor: Closed at 63.25, down 3.44%, with a trading volume of 91,500 and a transaction amount of 583 million [1] - Zhi Si Cha: Closed at 66.98, down 3.32%, with a trading volume of 121,700 and a transaction amount of 819 million [1] - Jin Shi Yuan: Closed at 40.10, down 2.81%, with a trading volume of 84,000 and a transaction amount of 340 million [1] - Si Xi Fen Jiu: Closed at 196.00, down 2.00%, with a trading volume of 62,700 and a transaction amount of 1.23 billion [1] Fund Flow Analysis - The liquor sector experienced a net outflow of 1.313 billion from institutional investors, while retail investors saw a net inflow of 982 million [1] - The following table details the fund flow for specific liquor stocks: - Tian You De Jiu: Institutional net inflow of 1.6124 million, retail net outflow of 828,900 [2] - Yang He Co.: Institutional net inflow of 291,500, retail net outflow of 8.5975 million [2] - Yi Li Te: Institutional net outflow of 3.4372 million, retail net inflow of 3.1047 million [2] - *ST Rock: Institutional net outflow of 4.3305 million, retail net inflow of 5.0205 million [2]

Core Viewpoint - The liquor industry is experiencing a mixed performance as it enters the peak season, with demand showing improvement on a month-over-month basis but still facing a 10-20% shortfall year-over-year [1] Industry Summary - The Shanghai Composite Index rose by 0.07% to 3822.59 points, while the liquor sector closed at 2294.54 points, down 1.01% [1] - A total of 19 liquor stocks declined, with Shede Liquor leading the drop at 3.08% [1] - Major liquor companies such as Kweichow Moutai, Wuliangye, Shanxi Fenjiu, Luzhou Laojiao, and Yanghe Brewery saw varying stock price changes, with Kweichow Moutai closing at 1457.00 CNY per share, down 0.75% [1][1][1] Company Insights - According to a report from China Merchants Securities, the liquor industry is entering a peak season with overall feedback being tepid [1] - The report emphasizes the importance of focusing on supply-side changes at the enterprise level during this adjustment period, as leading companies like Moutai and Wuliangye are sending positive signals [1] - As the peak season unfolds, the direction of industry clearing will become clearer, and the bottom of the market will become increasingly evident [1]

Summary of the Conference Call on the Baijiu Industry Industry Overview - The overall sales volume in the baijiu industry has declined, with distributors expecting a 20%-30% drop in sales during the upcoming double festival period. Sales volume decreased by 40%-50% in July and August [1][2] - High-end baijiu wholesale prices are weak, with Feitian Moutai priced around 1,780 RMB. Demand for baijiu in banquet scenarios remains stable, while mid-range products perform more consistently [1][4] Key Points and Arguments - **Sales Performance**: The baijiu industry is facing significant sales pressure, with actual sales declines exceeding previous market expectations. Most regions, except for Henan, are experiencing sales drops greater than anticipated [2] - **Inventory Levels**: From June to August, the average sales volume decreased by 50%, leading to a slight increase in inventory levels compared to last year. Most distributors have higher inventory levels than the same period last year [3] - **Price Trends**: High-end baijiu products like Feitian Moutai and Wuliangye are experiencing weak wholesale prices. Feitian Moutai's price is expected to fluctuate between 1,700 and 1,800 RMB during the double festival period [4][8] - **Company Performance Adjustments**: Guizhou Moutai has lowered its annual growth target but maintains a steady collection rate compared to last year. Wuliangye is also expected to adjust its growth target due to market conditions [6][9] Company-Specific Insights - **Guizhou Moutai**: The company is increasing promotional activities for its series of products and expects a slight downward adjustment in annual growth targets, which may benefit investors by releasing risks [8] - **Wuliangye**: The company is shifting its focus from absolute growth to long-term competitiveness, with a return rate of approximately 60%-70% [9][10] - **Luzhou Laojiao**: The company is implementing a price stabilization strategy and focusing on expanding its terminal market through targeted promotions [11] - **Shanxi Fenjiu**: The company is facing significant sales declines but is maintaining a stable price point due to good relationships with distributors [13] Investment Recommendations - The report suggests focusing on companies with potential for policy-driven growth and those that can adapt to market changes, such as Jiu Gui, She De, and Shui Jing Fang. Mid-range products like Gu Qing Gong and Ying Jia Gong are also highlighted for their recovery potential [5][7] - The overall sentiment is that the baijiu industry is currently at a low point, but there are opportunities for recovery and growth in specific segments and companies [27] Additional Considerations - The impact of external factors, such as government inspections and coal supply pressures, has affected consumption patterns in various regions [12][14] - The performance of next-tier baijiu products is weaker compared to high-end and mid-range products, indicating a need for careful monitoring of new product launches [21] This summary encapsulates the key insights and trends discussed in the conference call regarding the baijiu industry, highlighting both challenges and potential investment opportunities.

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 Insights - The liquor market is experiencing increased activity as the Mid-Autumn Festival and National Day approach, with a notable acceleration in the sales of white liquor, although prices are declining [1][21] - High-end liquor products are seeing a price drop, while low-end products remain stable, prompting distributors to launch various promotional activities to clear inventory [1][21] Price Trends - In Guangzhou, 15 products have seen a decline in retail prices, including high-end brands like Moutai and Wuliangye, with price reductions ranging from several to dozens of yuan [2][3] - Moutai's average price is approximately 2065 yuan, down about 40 yuan from the previous period, while Wuliangye's price decreased by 11 yuan to around 910 yuan [2][3] - In Shenzhen, Moutai's average retail price is 2102.91 yuan, with significant price variations between online and offline channels [9][11] Sales Dynamics - Distributors report a noticeable shrinkage in demand compared to last year, leading to aggressive pricing strategies to stimulate sales [5][21] - High-end products are experiencing increased sales, while low-alcohol products are gaining popularity, indicating a shift in consumer preferences [21] Regional Insights - In Shenzhen, the price fluctuations have stabilized as demand increases, with expectations of a 20% rise in high-end product sales in September [10][21] - In Dongguan, the market shows a downward trend in mid-to-high-end product prices, with 14 out of 18 products experiencing price drops [17][19] Promotional Strategies - Liquor distributors are implementing various promotional strategies, such as discounts and bundled offers, to boost sales ahead of the festive season [3][21] - Some stores are offering promotions like "buy five boxes, get one free" to increase sales volume, contributing to the overall price decline [3][5]

Group 1 - The three major indices collectively declined, with the Shanghai Composite Index closing at 3820.09 points, down 0.30% [1] - The liquor sector closed at 2317.98 points, up 0.11%, with 15 liquor stocks rising [1] - Individual stock performance included Kweichow Moutai closing at 1467.97 CNY per share, unchanged; Wuliangye at 124.08 CNY, up 0.11%; Shanxi Fenjiu at 200.00 CNY, down 0.50%; Luzhou Laojiao at 134.85 CNY, up 0.86%; and Yanghe Brewery at 70.45 CNY, up 0.46% [1] Group 2 - Guosen Securities believes that liquor companies will focus on destocking and promoting sales in the short term [1] - In the medium to long term, there should be an increased emphasis on consumer engagement and consumption scenario cultivation, along with active internationalization and targeting younger demographics [1]

Core Viewpoint - The liquor industry is experiencing a significant market adjustment, with second and third-tier companies facing substantial challenges, while leading companies show resilience, indicating a potential turning point for the industry [1] Industry Summary - On September 19, the Shanghai Composite Index fell by 0.03% to 3830.65 points, with the liquor sector closing at 2299.94 points, down 0.67% [1] - Among 15 liquor stocks, the majority declined, with Shui Jing Fang leading the drop at 2.20% [1] - Key liquor companies' stock performance included: - Kweichow Moutai: closed at 1465.71 CNY, down 0.15% - Wuliangye: closed at 123.45 CNY, down 0.40% - Shanxi Fenjiu: closed at 198.18 CNY, down 1.40% - Luzhou Laojiao: closed at 133.17 CNY, down 0.40% - Yanghe: closed at 70.25 CNY, up 0.17% [1] Company Summary - According to China Merchants Securities, the second quarter saw an accelerated market clearing in the liquor industry, with a thorough exit of second and third-tier companies [1] - Leading liquor companies are expected to show improved financial statements, which will serve as a critical signal for the industry's turning point, potentially reshaping market expectations across the industry, channels, and capital markets [1]

Core Viewpoint - The Chinese liquor industry is approaching a critical seasonal test in Q3 2025, with cautious market sentiment prevailing. Goldman Sachs predicts that Q3 2025 may represent a low point in valuation for the industry, with some stocks already reflecting a "bottoming" expectation. Target prices for leading companies like Moutai and Wuliangye have been adjusted upwards [1][2]. Group 1: Market Conditions - The liquor industry is facing dual pressures from ongoing anti-extravagance policies and a reduction in the length of the Mid-Autumn Festival and National Day holidays, leading to weakened retail momentum [2]. - Companies are focusing on inventory normalization through measures such as waiving prepayments and controlling shipment volumes, which may pressure short-term performance but help return inventory levels to normal [2]. - Despite a significant decline in wholesale prices for Moutai and Wuliangye, some retailers have slightly increased end prices in anticipation of brand-controlled inventory to support profits [2][3]. Group 2: Valuation and Stock Performance - The stock prices of liquor companies have risen by 24% since Q3, with a 17% increase in price-to-earnings ratios, indicating that the market has already absorbed the impact of policy changes [2]. - The average target price for liquor stocks has been raised by 6%, with mid-to-high-end liquor valuation multiples adjusted upwards by 13% to 19% [2]. - The high dividend yields of leading companies like Moutai and Wuliangye provide a valuation safety net, with potential price increases of 20% to 30% based on normalized earnings projections for 2027 [4]. Group 3: Company-Specific Adjustments - Moutai's target price has been adjusted from 1742 yuan to 1724 yuan, reflecting a 3% to 4% decrease in earnings expectations due to policy impacts [5]. - Wuliangye's target price has been raised from 139 yuan to 145 yuan, despite a 5% to 8% reduction in earnings expectations, as its valuation multiple has been increased from 17 times to 18.5 times [5]. - Other companies like Luzhou Laojiao and Gujing Gongjiu have also seen adjustments in their target prices and earnings expectations, reflecting varying degrees of resilience and market conditions [5]. Group 4: Investment Strategy - The current "low point" in Q3 is viewed as a critical phase for the industry, with inventory control measures potentially laying the groundwork for recovery in 2026 as policies ease [6]. - Investment recommendations focus on leading companies with strong dividend yields and brand strength, as well as those with significant valuation adjustments and earnings resilience [7].

Group 1: Market Performance - The food and beverage sector experienced a significant pullback on September 18, with the Food ETF (515710) dropping over 2% during intraday trading before closing down 1.41% [1] - Major liquor stocks, including Shede Liquor, Yanghe Brewery, and Luzhou Laojiao, saw declines exceeding 2%, while leading brands like Kweichow Moutai and Wuliangye fell over 1% [1] Group 2: Investment Trends - Despite the recent pullback, there has been a notable influx of capital into the food and beverage sector, with the Food ETF (515710) recording a net subscription of 24.1 million CNY over the past five trading days [1] - The food and beverage sector is currently viewed as having a favorable valuation, with the Food ETF's underlying index PE ratio at 21.12, placing it at a low point historically [4] Group 3: Industry Outlook - Kweichow Moutai ranked third in the Kantar BrandZ Most Valuable Chinese Brands 2025 list, with a brand value of 80.023 billion USD, marking its sixth consecutive year in the top three [3] - Analysts suggest that as policy pressures ease, there is potential for a weak recovery in demand for liquor, particularly with the upcoming holiday season expected to improve sales [3][6] - The liquor industry is seen as being at a low valuation point, with expectations for gradual improvement in fundamentals as the market stabilizes [4][6]