Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Views - The company has experienced a decline in revenue and net profit in Q3 2025, with revenue of 5.46 billion yuan, down 4.89% year-on-year, and a net profit of 0.25 billion yuan, down 33.02% year-on-year [4][8] - The company is adjusting its revenue growth forecasts for 2025-2027 to -0.99%, 6.20%, and 8.35%, respectively, with net profit growth forecasts of -3.13%, 7.77%, and 11.46% [4][10] - The increase in income tax rate significantly impacted profitability, rising to 43.23% in Q3 2025 from 26.18% in Q1-3 2025 [3] Financial Performance - For Q1-3 2025, the gross margin was 64.65% and the net margin was 13.56%, while for Q3 2025, the gross margin decreased to 61.44% and the net margin fell to 4.07% [3] - Operating cash flow for Q1-3 2025 was 283 million yuan, a decrease of 18.89% year-on-year, and for Q3 2025, it was -38 million yuan [3] - The company’s contract liabilities at the end of Q1-3 2025 were 632 million yuan, an increase of 32.73% year-on-year [3] Product Performance - In Q3 2025, the company’s product revenue was segmented as follows: above 300 yuan at 1.57 billion yuan (down 1.61%), 100-300 yuan at 2.58 billion yuan (down 16.55%), and below 100 yuan at 0.91 billion yuan (up 18.41%) [8] - The proportion of products priced above 300 yuan increased to 31.03% in Q3 2025, while products below 100 yuan accounted for 17.96% [8] Regional Performance - In Q3 2025, the company’s revenue from the domestic market was 3.55 billion yuan (down 5.2%), while revenue from the external market was 1.51 billion yuan (down 11.79%) [2] - The domestic market's revenue contribution increased to 70.23% in Q3 2025, up 1.53 percentage points [2]

Core Viewpoint - The wholesale reference price for 53-degree 500ml Feitian Moutai has dropped to 1690 RMB, marking a new low since its listing and falling below the 1700 RMB threshold for the first time [1] Price Trends - The wholesale price for the original box of Feitian Moutai is reported at 1715 RMB, down 20 RMB from the previous day [1] - Both products have seen a cumulative decline of over 31% from their initial prices of 2220 RMB and 2255 RMB respectively [1] Industry Analysis - According to Guotai Junan's latest research report, while the sales of liquor have shown a month-on-month recovery during the Mid-Autumn Festival and National Day peak seasons, the year-on-year performance remains weak [1] - The industry is currently characterized by "low expectations and weak realities" [1]

Summary of Conference Call Notes Industry Overview - The conference call primarily discusses the Chinese liquor industry, focusing on major brands such as Yanghe, Jinshiyuan, Moutai, Wuliangye, and Gujing. - The overall performance of the liquor market during the Double Festival period shows mixed results, with some brands experiencing declines while others see slight growth. Key Points and Arguments Yanghe's Performance - Yanghe's shipment volume declined by 16.5% during the Double Festival, while Jinshiyuan's increased by 8.9% [1][4]. - The leadership change at Yanghe has led to a focus on promoting mass-market products, such as the new Hai Zhi Lan, and plans to launch products priced below 300 RMB [9]. - Yanghe's market performance is not yet at the bottom, with expectations of further declines over the next two to three years due to unstable channel conditions and difficulties in attracting new distributors [10]. Jinshiyuan's Stability - Jinshiyuan's performance is considered slightly better than its peers, with a terminal transaction price for its four-open product around 420 RMB and the two-open product around 280 to 290 RMB [13]. - Despite thin margins, Jinshiyuan maintains its market share due to fast natural sales and high brand recognition [13]. Gujing's Inventory and Pricing - Gujing has a high inventory level, with a cycle exceeding 120 days. The wholesale price for Gu 16 is approximately 300 RMB, while Gu 20 ranges from 400 to 460 RMB [18][19]. - Gujing's sales volume decreased by 3% during the Double Festival, but overall performance remained stable [21]. Market Dynamics - Moutai's shipment volume remained flat with a slight increase of about 1%, while Wuliangye saw a decline of 1.7%, and Luzhou Laojiao dropped by 13.1% [3][21]. - The online channel's development in the liquor market depends on the manufacturers' efforts, with distributors lacking pricing advantages [25]. Profitability and Pricing Strategies - Yanghe's price decline is attributed to demand issues and customer preferences, with stricter cost controls affecting price stability [7][8]. - Jinshiyuan's V3 series has a profit margin of about 15%, while the four-open series has a gross margin of around 10% [31]. Future Outlook - For Yanghe, the fourth quarter of 2025 does not have repayment requirements, and most distributors expect to complete 75% of their repayment tasks [29]. - Jinshiyuan's distributors will adjust growth targets based on market conditions, with expectations for high growth in the V3 series [29]. Additional Important Insights - The overall liquor market in Jiangsu province is performing relatively well, with Moutai and Jinshiyuan being among the few brands to show growth [22]. - The feedback from the autumn sugar meeting indicates that distributors are primarily concerned about completing their tasks and whether year-end rebates will be honored [23]. - The performance of non-standard products in the liquor market has seen significant price fluctuations, with the need for Moutai's pricing strategy to influence overall market trends [27].

Core Viewpoint - The stock of Zhenjiu Lidu (06979) has seen a decline of nearly 5%, currently trading at 8.62 HKD, with a trading volume of 93.05 million HKD. The overall market sentiment reflects concerns about the liquor industry's performance during the upcoming holiday season and potential price pressures in the near term [1]. Industry Summary - The liquor sales have shown a marginal acceleration about a week before the holiday, but are expected to decline by approximately 20%, aligning with pre-holiday expectations [1]. - Factors such as upcoming sales tasks, year-end seasonal cash flow pressures, and e-commerce subsidies during the Double Eleven shopping festival are anticipated to exert downward pressure on prices from October to November [1]. - According to Guotai Junan, further adjustments to the sector's financial reports are expected by the third quarter of 2025 [1]. Company Summary - Zhenjiu Lidu has recently launched its new flagship product "Dazhen," which has already generated a revenue of 370 million CNY and has signed over 2,800 alliance merchants nationwide [1]. - Huaxin Securities previously indicated that the introduction of "Dazhen" is positioned to complement the Zhen 15 and Zhen 30 series, with a high quality-to-price ratio expected to create a third growth curve for Zhenjiu [1].

Investment Rating - The report maintains a strong buy rating for key companies such as Guizhou Moutai, Wuliangye, and Shanxi Fenjiu, while recommending an increase in holdings for companies like Yingjia Grape Wine and Kuaijie Wine [8][33]. Core Insights - The demand gap remains significant, with a 20% year-on-year decline in sales during the Mid-Autumn Festival and National Day holidays, despite a month-on-month improvement [2][11]. - The report highlights a continued "Matthew Effect," where leading brands like Moutai and Wuliangye are gaining market share at the expense of lower-tier competitors [2][8]. - The recovery of high-end liquor sales is slow, with a notable increase in demand for mid-range and low-end products, particularly in banquet settings [3][12]. Summary by Sections 1. Sales Feedback for the Holiday Season - Sales performance during the Mid-Autumn Festival and National Day was generally flat, with a 20% decline compared to the previous year, although there was a month-on-month improvement [2][11]. - Mid-range and low-end liquor sales outperformed high-end products, with brands like Moutai and Wuliangye gradually capturing market share from competitors due to price declines [2][12]. 2. Company Tracking - Guizhou Moutai's sales are on track, with a completion rate of approximately 75% for the year, and inventory levels are stable at 0.5-1 month [26][31]. - Wuliangye's sales completion rate is around 70%, with inventory levels between 1-2 months, and recent promotional efforts have improved dealer confidence [26][31]. - Shanxi Fenjiu maintains a completion rate of 75%-80%, with stable inventory levels and a strong market presence for its products [27][31]. 3. Investment Recommendations - The report suggests focusing on companies that are showing resilience and potential for recovery, particularly those that have adjusted their strategies ahead of the market, such as Shanxi Fenjiu and Guizhou Moutai [32][33]. - The anticipated recovery in demand for white liquor is expected to be supported by a positive price index in 2026, which may lead to inflation and increased profitability for companies in the sector [4][32].

Group 1 - The stock of Zhenjiu Lidu (06979) fell over 4% in the afternoon, currently down 3.92% at HKD 8.83, with a trading volume of HKD 120 million [1] - There are rumors in the market that Kweichow Moutai (600519) may lower its performance targets for the year, although the company has stated that it has not adjusted its annual performance goals and has completed its target progress for the first half of the year as planned [1] - According to Pacific Securities, channel surveys indicate that overall terminal sales in the industry have shown some recovery since August, but sales during the Mid-Autumn Festival and National Day are still expected to be under pressure year-on-year [1] Group 2 - Zhenjiu Lidu has launched its latest flagship product "Dazhen," which has already achieved a return of HKD 370 million, with over 2,800 national alliance merchants signed [1] - Huaxin Securities previously noted that the introduction of the new flagship product "Dazhen" is positioned to complement the Zhen 15 and Zhen 30 series, and its high quality-to-price ratio is expected to create a third growth curve for Zhenjiu [1]

Group 1 - The white liquor industry is entering a peak sales season during the Mid-Autumn and National Day holidays, with sales typically accounting for 20% to 30% of annual volume [1] - Major liquor brands, including Kweichow Moutai and Wuliangye, are launching promotional activities to boost sales during this period, with strategies such as creating a "Double Festival" brand image and enhancing consumer experiences [2] - The overall sentiment among distributors is cautious, with many focusing on inventory reduction rather than increasing stock levels, reflecting a more conservative approach to purchasing [3] Group 2 - Despite the enthusiasm from manufacturers, the price of white liquor is generally declining, with a reported decrease of 0.09% in the national white liquor price index as of early September 2023 [3] - The performance of listed liquor companies in the first half of the year shows a divergence, suggesting that the upcoming holiday sales will be a critical test for companies with strong brand power and effective management [4]

Core Viewpoint - The controlling shareholder of Kuozi Jiao, Liu Ansheng, plans to reduce his stake in the company due to personal financial needs, which may not significantly impact the secondary market due to the nature of the transaction [1][4]. Shareholder Reduction - Liu Ansheng intends to sell up to 10 million shares, representing 1.67% of the total share capital, through block trading within three months after the announcement [1]. - As of the announcement date, Liu Ansheng holds approximately 63.47 million shares, accounting for 10.58% of the company, and is part of a group of shareholders that collectively owns 42.01% of Kuozi Jiao [4]. Market Impact - The block trading method used for the reduction is expected to minimize market impact, as such transactions are conducted outside the regular trading system [4]. - The potential buyer is likely to be an institutional investor, which further reduces the likelihood of significant price fluctuations in the secondary market [4]. Company Performance - Kuozi Jiao's stock price has decreased by 14.48% year-to-date as of July 21, with an average price of 35.9 yuan per share [1]. - In Q1, Kuozi Jiao reported revenue of 1.81 billion yuan, a year-on-year increase of 2.4%, and a net profit of 610 million yuan, up 3.6% from the previous year [10]. - The company has faced challenges in sales, particularly in the mid to low-end product segments, which saw declines of 12.5% and 9% respectively [11]. Sales Dynamics - The company has experienced a slowdown in sales due to recent regulations affecting alcohol consumption, particularly impacting mid to high-end products [9]. - As of March, Kuozi Jiao had 1,032 distributors, with sales revenue from the Anhui province reaching 1.586 billion yuan, while sales from outside the province dropped by 19.84% [13].

Core Viewpoint - The price of certain white liquor products in the Southwest region has seen a rebound during the Dragon Boat Festival, but is expected to decline due to the upcoming "618" shopping festival and ongoing "billion-dollar subsidies" [2][9]. Price Trends - The average market price of Feitian Moutai (53 degrees/500ml) rose to 2606.8 RMB per bottle on May 31, up 20 RMB from 2586.8 RMB on April 31 [3]. - The average market price of the eighth generation Wuliangye (52 degrees/500ml) increased to 997.69 RMB per bottle, compared to 994.35 RMB on April 31 [3]. - The average price of Guojiao 1573 (52 degrees/500ml) also experienced an increase [3]. Inventory Levels - The fluctuation in white liquor prices is closely related to inventory levels, with recent reports indicating a reduction in high inventory situations for several brands [3][4]. - Wuliangye reported that some terminal inventories are running at zero, while Luzhou Laojiao stated that their inventory situation is currently safe and controllable [4]. Market Dynamics - The overall sales of premium liquor are slowing down, with a notable decline in demand for business and corporate group purchases [7]. - Despite the holiday season, the overall sales performance remains subdued, with many companies adjusting their revenue growth targets to align with macroeconomic indicators [7][8]. E-commerce Impact - The upcoming "618" e-commerce festival is expected to exert further pressure on retail prices, despite a slight price increase for high-end liquors during the Dragon Boat Festival [9]. - Analysts predict that while online sales may see growth during the "618" event, profit margins will be squeezed due to price reductions and high inventory levels among offline distributors [9].

Summary of Key Points from the Conference Call Industry Overview - The overall sales performance during the Dragon Boat Festival aligns with previous expectations, continuing a slight downward trend typical of the off-season. Sales of liquor are expected to decline by nearly 10% from May to date, with the decline not expanding significantly. This is primarily due to a low base, stable demand from regular gatherings, and a recovery in banquet events in many regions. However, demand for business entertainment and gift-giving remains under pressure [1][1][1]. Key Products and Pricing - Major products such as Feitian Moutai and Wuliangye have experienced price fluctuations before and after the Dragon Boat Festival, influenced by increased subsidies for liquor on online platforms. Feedback from channels indicates that the June allocation for Moutai has been paid but not yet delivered. The current wholesale price for Moutai is approximately 2,120 RMB per case and 2,060 RMB per bottle. For Wuliangye, pre-festival payments were low, and previously unpaid amounts are gradually being delivered. Online subsidies from platforms like Meituan have impacted the circulation price of Wuliangye, leading to a slight decline in the wholesale price to about 910 RMB [1][1][1]. Market Sentiment and Recommendations - The pricing of other controlled products remains relatively stable, with Guojiao priced around 860 RMB, and Qinghua 20 old stock priced at 375 RMB, with new stock being more expensive due to QR code features. Overall channel sentiment is cautious, and it is recommended to monitor price trends, particularly whether the wholesale price of Feitian can stabilize at 2,100 RMB. Recent actions by Moutai include the cancellation of the 100% flight purchase activity at airports and the announcement of the end of operations for "Guizhou Travel Premium" by the end of the year. Five new products are set to launch on the iMoutai platform [2][2][2]. Investment Recommendations - Despite ongoing challenges in the industry, it is suggested to maintain a base allocation in undervalued and low-expectation liquor companies. High-end brands with strong market presence, such as Moutai (20X) and Wuliangye (15X), are recommended, along with companies with strong channel dynamics like Shanxi Fenjiu (17X). Additionally, organizations with strong operational capabilities and high return potential, such as Laojiao (12X) and Gujing (13X), should be monitored [2][2][2].