Summary of the White Liquor Industry Conference Call Industry Overview - The white liquor industry is transitioning from a price-driven logic to a market share-driven logic, moving from growth assets to dividend assets, indicating that companies need to enhance market share for growth rather than relying on price increases [1][3][5] - The current market is characterized by a bottoming out of channel profits while performance has not yet reached its bottom, presenting left-side investment opportunities [1][6] Key Points and Arguments - **Demand-Side Factors**: The industry is influenced by demand-side factors such as credit expansion and per capita income, with performance fluctuations categorized into channel bottom, performance bottom, and inventory bottom [1][4] - **Investment Focus**: Investors should focus on channel bottom and performance bottom, as inventory bottom tends to lag [4] - **Policy Impact**: High-end consumption restrictions have led to a decline in channel profits since 2022, with expectations that by mid-2026, sales and revenue will align, potentially marking the performance and inventory bottom [1][9] - **Market Characteristics**: The current cycle shows price clearing and a trend towards larger brands, with top brands like Moutai demonstrating stronger risk resistance and better inventory cycles [1][11] - **Long-Term Trends**: The industry's logic is evolving due to economic deleveraging and demographic changes, leading to a shift from high-end to affordable consumption, necessitating companies to adapt to this trend [5][13] Valuation and Investment Strategy - The valuation framework for the white liquor industry may shift from PE and PEG to PBR, with investment returns increasingly derived from stable performance increments and dividends, indicating a transition towards bond-like assets [2][15] - **Investment Opportunities**: Current market conditions suggest a focus on high-frequency signals, such as Moutai's transaction prices, which reflect supply and demand dynamics [10] - **Short-Term Outlook**: The white liquor sector is seen as having absolute return potential, although it is more of a short-term rebound opportunity rather than a long-term trend [16] Changes in Underlying Logic - The underlying logic of the white liquor industry has changed, with a reduced emphasis on investment and luxury attributes and a strengthened focus on fast-moving consumer goods attributes [1][13] - The shift from price logic to market share logic means that companies that can increase market share will achieve higher valuations [14] Key Conditions for Transition - For the industry to transition from deep-cycle growth stocks to bond-like assets, it must achieve stability in growth expectations, free cash flow, and maintain high ROE [19] Conclusion - The white liquor industry is at a critical juncture, with significant changes in market dynamics and investment logic. Investors should remain vigilant about policy impacts, demand-side factors, and the evolving valuation framework to identify potential opportunities and risks in the sector [1][2][3][5][15]

Core Viewpoint - The policy variables are accelerating the clearing of the liquor industry, with the industry moving towards performance bottoms, and stock prices are expected to turn before demand-side recovery [1][3][18] Mid-Cycle Analysis - The core contradiction in the liquor industry remains on the demand side, with the adjustment process involving channel bottoms, performance bottoms, and inventory bottoms in that order [3][7] - Currently, the industry is at the channel profit bottom and is accelerating towards the performance bottom, which is expected to be reached by mid-2026 [7][18] - The liquor sector is transitioning from a growth stock to a "quasi-debt asset" as the growth logic shifts from volume-price to market share [2][43] Structural Changes - The high-end consumption attribute of liquor is weakening while its fast-moving consumer goods (FMCG) attribute is strengthening, leading to a shift from volume-price logic to market share logic [44][60] - The industry is experiencing a structural change where the pricing mechanism is being redefined, with a focus on stable returns and dividends [2][72] Demand Side Dynamics - The demand pressure on liquor is easing as the real estate and debt cycles pass their steepest decline phases, which is expected to positively influence consumer spending [21][24] - The liquor industry is currently at the channel profit bottom and is moving towards the performance bottom, with expectations that the performance bottom will precede the demand bottom [24][26] Investment Logic Transformation - The investment logic for liquor is being restructured, with a focus on maintaining stable return on equity (ROE) and the ability to provide dividends and share buybacks [75][72] - The transition from a growth stock to a quasi-debt asset requires the industry to undergo a complete inventory cycle and establish stable growth expectations [75][72] Market Share Focus - Future growth in the liquor industry will be driven by market share rather than total volume expansion, emphasizing the importance of brand influence and product line positioning [60][61] - Companies that can enhance their market share must have strong brand recognition, effective customer acquisition strategies, and sufficient production capacity [61][75]

Core Viewpoint - The article suggests that policy variables are accelerating the clearing of the liquor industry, with the industry moving towards performance bottoms, and stock prices are expected to turn before demand-side indicators [1] Investment Recommendations - The industry is currently experiencing three bottoms: channel bottom, performance bottom, and inventory bottom, in that order. The performance bottom is expected to be reached by mid-2026, with stock prices likely to show a trend reversal before demand-side indicators [2] - The changing economic structure and demographic characteristics in China are leading to a shift in liquor's consumption attributes from high-end to fast-moving consumer goods, indicating that companies with a focus on market share will have a competitive advantage [2] Long-term Perspective - The investment logic for liquor is being reshaped from "cyclical growth" to "quasi-debt assets." As the product attributes change, the focus will shift from volume-price logic to market share logic, with stable return on equity (ROE) becoming increasingly important for pricing [3] - The industry will require a significant amount of time to complete this pricing transition, necessitating a reconstruction of stable growth expectations and consistent dividend and buyback policies [3]

Core Viewpoint - The report from Guotai Junan Securities indicates that policy variables are accelerating the clearing process in the liquor industry, with expectations of reaching performance bottoms by mid-2026, and that liquor stock prices may show a trend reversal ahead of demand-side recovery [1][2] Group 1: Industry Dynamics - The core contradiction in the liquor industry remains on the demand side, with the adjustment process focusing on three bottoms: channel bottom, performance bottom, and inventory bottom, in that order [2] - The current phase is at the channel profit bottom, moving towards the performance bottom, which is expected to be reached by mid-2026 [2] - Liquor stocks are anticipated to show a trend-level turning point before the demand side does, based on high-frequency signals such as batch prices [2] Group 2: Transformation of Liquor Attributes - The economic structure and demographic characteristics in China are leading to a shift in liquor's commodity attributes, with high-end consumption properties weakening and fast-moving consumer goods attributes strengthening [2] - The growth logic for liquor companies is evolving from a volume-price logic to a share logic, where companies with share logic will demonstrate sustained competitive advantages [2] Group 3: Long-term Investment Logic - The investment logic for liquor is being redefined from "cyclical growth" to "quasi-debt assets," with most liquor stocks expected to see weakened growth potential [3] - A few companies with competitive advantages may internalize their strengths into "quasi-debt assets," making stable ROE increasingly important for liquor pricing [3] - The industry will require a significant amount of time to complete this pricing transition, necessitating a reconstruction of stable growth expectations and consistent dividend and buyback plans [3]

Investment Rating - The report maintains an "Accumulate" rating with a target price of 217.97 CNY, unchanged from the previous forecast [2][16]. Core Views - The report emphasizes that the company is experiencing a significant increase in market share within the province, supported by strong channel advantages. The performance outlook is positive due to the strengthening of market share and channel push [3][19]. - The white liquor industry is currently in its third growth phase, transitioning from a price bubble phase to a focus on volume. This shift indicates a weakening growth potential for the sector, but leading companies can still achieve performance certainty through increased market concentration [18][19]. Financial Summary - The company’s revenue is projected to grow from 20,254 million CNY in 2023 to 27,444 million CNY in 2026, reflecting a compound annual growth rate (CAGR) of approximately 8.3% [16]. - Net profit attributable to the parent company is expected to rise from 4,589 million CNY in 2023 to 7,088 million CNY in 2026, with a CAGR of about 13.1% [16]. - Earnings per share (EPS) forecasts for 2024, 2025, and 2026 are 10.66 CNY, 12.06 CNY, and 13.41 CNY, respectively [16][18]. Market Position and Strategy - The company is effectively leveraging its strong channel push to enhance its market share in mid-tier price segments, with notable growth in established markets like Hefei [19]. - The report highlights that the company’s core advantage lies in its channel efficiency, with strong cooperation from distributors and a sustained market share increase in mature markets [19].