Investment Rating - The investment rating for the essential consumer goods sector is "Outperform" for multiple companies including Kweichow Moutai, Wuliangye, and Yili [1] Core Insights - In November 2025, four out of eight monitored essential consumer sectors showed positive growth, while four experienced negative growth, with the growth sectors being condiments, frozen foods, soft drinks, and catering services [29] - The overall growth rates across all sectors have slowed compared to the previous month, attributed to macroeconomic conditions, structural industry challenges, and seasonal factors [29] Subsector Summaries Mid-to-High-End and Above Baijiu - Revenue for the mid-to-high-end and premium baijiu sector in November was RMB 24 billion, down 13.0% year-on-year, with cumulative revenue from January to November at RMB 349.2 billion, a decline of 6.2% [30] - The market is experiencing simultaneous declines in both volume and price, with a conservative consumer spending trend [30] Mass-Market and Below Baijiu - Revenue for the mass-market and lower-tier baijiu industry reached RMB 18.9 billion in November, marking a 3.3% year-on-year decline, with cumulative revenue from January to November totaling RMB 180.9 billion, down 8.5% [30] - The production of baijiu in October was 276,000 kiloliters, down 18.3% year-on-year, indicating a challenging market environment [30] Beer - The domestic beer industry generated revenue of RMB 9.9 billion in November, a 2.0% year-on-year decline, with cumulative revenue from January to November at RMB 162.6 billion, representing a 0.2% year-on-year increase [31] - Seasonal demand has decreased due to a nationwide temperature drop, leading to subdued overall demand [31] Condiments - The condiments sector reported revenue of RMB 418 billion in November, a year-on-year increase of 0.8%, with cumulative revenue from January to November at RMB 4,129 billion, up 1.3% [18] Frozen Foods - The frozen foods sector achieved revenue of RMB 81.6 billion in November, a year-on-year increase of 4.0%, with cumulative revenue from January to November at RMB 964 billion, up 2.2% [22] Soft Drinks - Revenue for the soft drinks sector was RMB 388 billion in November, a year-on-year increase of 2.1%, with cumulative revenue from January to November at RMB 6,583 billion, up 4.1% [24] Catering - The catering industry reported revenue of RMB 130.4 billion in November, a year-on-year increase of 0.3%, with cumulative revenue from January to November at RMB 1,607 billion, down 0.7% [26]

Core Viewpoint - Shanxi Fenjiu reported a total revenue of 23.964 billion yuan for 1H25, a year-on-year increase of 5.35%, and a net profit attributable to shareholders of 8.505 billion yuan, up 1.13% year-on-year. In 2Q25, revenue was 7.441 billion yuan, a slight increase of 0.45%, while net profit dropped by 13.50% year-on-year to 1.857 billion yuan [1][2]. Revenue and Profit Analysis - In 2Q25, the revenue from Fenjiu was 7.18 billion yuan, up 0.56% year-on-year, while other liquor revenues were 220 million yuan, down 3.5% year-on-year. The company increased the distribution of its glass Fenjiu due to a weak overall consumption environment [2]. - The revenue from Shanxi province in 2Q25 was 2.65 billion yuan, down 5.3% year-on-year, while revenue from outside the province was 4.75 billion yuan, up 4% year-on-year, indicating increased distribution efforts for glass Fenjiu outside the province [2]. Profitability and Cost Structure - The product structure shift negatively impacted profitability, with gross margin decreasing by 3.2 percentage points to 71.9%. The net profit margin fell by 4 percentage points to 25% [2]. - Sales cash receipts in 2Q25 were 6.94 billion yuan, down 6.1% year-on-year, while contract liabilities at the end of the period were 5.98 billion yuan, up 4.4% year-on-year [2]. Future Outlook - The company is expected to relieve pressure starting in Q3, gradually returning to healthy development. The increase in channel inventory and the shift in product structure reflect growth pressures, but the brand and product advantages remain strong [3]. - The company anticipates that the second half of 2025 will focus on promoting a healthy market development after alleviating growth pressures [3]. Earnings Forecast and Valuation - Due to restrictions in dining and other consumption scenarios, the earnings forecast for 2025 and 2026 has been lowered by 10.5% and 11.8% to 11.7 billion yuan and 12.3 billion yuan, respectively. The target price remains at 228 yuan, corresponding to 24/23 times P/E for 2025/26, with a current price corresponding to 21/20 times P/E, indicating a potential upside of 15.4% [4].