Investment Rating - The report does not explicitly state an investment rating for the spirits industry or specific companies within it Core Insights - The spirits industry is currently experiencing a transition period, with companies focusing on stability, channel profits, and product quality rather than aggressive growth targets [3] - There is a noted weak trend in consumption around the Dragon Boat Festival, with only Moutai showing a slight increase in prepayment compared to the previous year [1][6] - Companies are increasingly targeting younger consumers and expanding their brand rejuvenation efforts to capture this demographic [3] Summary by Company Moutai - Moutai has introduced new promotional policies for residential and wedding banquets to stimulate demand, including cash rebates and complimentary honeymoon trips for larger events [13] - The wholesale price of original case Feitian Moutai decreased from Rmb2,165 to Rmb2,125, while unpacked Feitian Moutai's price fell from Rmb2,080 to Rmb2,060 [2][22] Wuliangye - Wuliangye's wholesale price remained stable at Rmb950, with prepayment rates in the first quarter of 2025 reported at 40%-50% [6][22] Guojiao 1573 - Guojiao 1573's wholesale price decreased from Rmb860 to Rmb855, with prepayment rates around 40%-45% [6][22] Yanghe - Yanghe reported a prepayment rate of approximately 45% and is focusing on expanding its sales network [6][8] Gujing - Gujing aims for nationwide expansion and a focus on sub-premium strategies, with a sales network covering over 70% of regions nationwide [7][8] Yingjia - Yingjia targets total sales of Rmb7.6 billion for 2025, reflecting a 3.5% year-on-year increase, and plans to improve dividend payout ratios [11][13] Market Trends - The retail sales of liquor and tobacco in China grew by 5.1% year-on-year in April 2025, indicating a gradual recovery in the market [13] - Spirits companies are focusing on improving retail sell-through, inventory destocking, and channel expansion amid industry-wide growth deceleration [13]

Investment Rating - The report maintains a "Buy" rating for Kweichow Moutai, Wuliangye Yibin, Luzhou Laojiao, and Fen Wine, while issuing "Neutral" ratings for Anhui Gujing and Jiangsu King's Luck Brewery, and "Sell" ratings for Jiangsu Yanghe, Sichuan Swellfun, and Jiugui Liquor [7][8]. Core Insights - The spirits industry is experiencing a slowdown in growth, with average sales and net profit growth projected at 6% and 8% respectively for 2025, following a tough 4Q24 [1][6]. - Super premium brands like Moutai and Wuliangye continue to show resilience, achieving higher growth compared to mid- to low-end segments [2][16]. - Companies are adopting more cautious financial guidance for 2025, indicating a focus on channel health and inventory management [5][18]. Summary by Sections Sales and Profit Performance - Spirits coverage saw a slowdown with average sales growth of 7% and net profit growth of 8% in 2024, with a tough 4Q24 showing only 3% sales growth [1][11]. - Moutai and Wuliangye reported strong sales growth of 16% and 7% respectively in 2024, while Jiangsu Yanghe faced a significant decline of 13% [13][16]. Company Guidance - Most companies have set lower financial guidance for 2025, reflecting caution regarding demand outlook and a focus on resolving channel inventory issues [5][18]. - Kweichow Moutai's guidance for 2025 includes a sales growth target of 9%, down from 15% in 2024 [18]. Market Trends - The report highlights a divergence in performance between super premium and upper mid-end players, with super premium brands maintaining stable demand while upper mid-end brands like Yanghe and Jiugui faced significant declines [16][22]. - The demand for upper mid-end spirits is declining, while super premium segments remain stable, indicating a shift in consumer preferences [20][22]. Shareholder Returns - There is a notable increase in dividend payout ratios across the sector, with some companies committing to high payout ratios and total cash dividends [17][28]. - Wuliangye and Laojiao have raised their dividend payout ratios to approximately 70% and 65% respectively, reflecting a commitment to shareholder returns [17]. Valuation and Earnings Revisions - The average P/E ratio for spirits coverage is currently at 16x for 2025, slightly above historical averages, with a general downward revision in earnings forecasts for several companies due to competitive pressures [1][6][28]. - Wuliangye's earnings forecast has been revised upwards, while forecasts for Gujing, King's Luck, Yanghe, and Swellfun have been revised downwards [6][28].