Summary of the White Liquor Industry Conference Call Industry Overview - The white liquor industry is currently experiencing a cyclical adjustment, with sales performance not yet turning positive despite meeting expectations during the Mid-Autumn Festival. The main reasons for this include weak business demand and slow recovery of banquet scenarios [1][2] - The industry is expected to see a gradual narrowing of sales decline until it turns positive in the second quarter of next year, with a significant drop in sales unlikely [1][2] Key Points on Sales and Inventory - Actual sales have declined by approximately 20%-30%, while reported figures show a smaller decline, indicating that many companies are controlling their results [5][6] - The inventory cycle in the white liquor industry is long, leading to a slow recovery. Channel inventory has not been fully cleared, and it will take several months to do so [3][4] - Strong brands like Moutai and Wuliangye are still increasing inventory, while other brands are forced to reduce it. This has created a significant brand differentiation in the market [3][4] Financial Performance and Reporting - Most liquor companies are unlikely to meet their annual targets due to a significant drop in payments, which is greater than the decline in sales. The third-quarter reports are expected to be significantly lower than anticipated [5][6] - The second quarter of next year is projected to be a turning point for the industry, with some companies already achieving profit recovery [8] Market Sentiment and Stock Performance - The overall performance of the white liquor sector has been disappointing this year, heavily impacted by the ban on alcohol consumption. However, due to ample market liquidity and low stock prices, the absolute bottom is believed to have been reached [9] - The stock price of leading companies like Moutai is supported by dividend yields, limiting downside potential. Future upward movement will depend on significant improvements in sales and a continued narrowing of declines [9][10] Future Outlook - The third-quarter reports will be crucial for assessing inventory clearance and market confidence. If both inventory and reports are cleaned up, the market may gain confidence for forward-looking allocations [10] - A neutral to slightly optimistic stance is recommended, with potential relative gains from short-term sales exceeding expectations and the rebound in stock prices [11]

Investment Rating - The investment rating for the company is "Buy" (maintained) with a target price of 232.08 CNY [1][10] Core Views - The company shows resilient performance with steady growth in revenue, despite a slight decline in profit margins due to product mix adjustments [4][9] - The company is focusing on expanding its market presence outside of Shanxi, with significant growth in regions like the Yangtze River Delta and Pearl River Delta [9] - The product portfolio, particularly the "Glass Fen" and "Qinghua 20" series, is expected to maintain strong demand and adaptability in various market conditions [9] Financial Performance Summary - Revenue for 2023 was 31,928 million CNY, with a year-on-year growth of 21.8%. The forecast for 2025 is 35,471 million CNY, reflecting a slight decline of 1.5% [7] - Operating profit for 2023 was 14,224 million CNY, with a year-on-year growth of 30.8%. The forecast for 2025 is 15,952 million CNY, indicating a decrease of 3.5% [7] - Net profit attributable to the parent company for 2023 was 10,438 million CNY, with a year-on-year growth of 28.9%. The forecast for 2025 is 11,803 million CNY, showing a decline of 3.6% [7] - Earnings per share (EPS) for 2023 was 8.56 CNY, projected to be 9.67 CNY in 2025 [7][10] Market Performance Summary - The company's stock price as of September 2, 2025, was 200.14 CNY, with a 52-week high of 232.57 CNY and a low of 142 CNY [1] - The company's absolute performance over the past week was -3.73%, with a 12-month performance of 23.75% [2]

Group 1 - The core viewpoint of the report emphasizes the short-term impact on consumption scenarios and the long-term focus on the bottoming out of the cycle and strategic choices of liquor companies, particularly highlighting the investment opportunities in leading liquor companies ahead of the Mid-Autumn Festival and National Day [1] - The current adjustment period is deeper than the previous one from 2012-2015, with greater pressures from economic and policy backgrounds, leading to a more severe short-term impact on consumption scenarios compared to the last adjustment period [1] - The report identifies two key points for long-term observation: the way the liquor cycle bottoms out and the strategic choices made by companies during this adjustment period, which will determine which companies can navigate through the cycle [1] Group 2 - The report outlines key signals for the liquor industry to identify the bottoming out, including the performance expectations of liquor companies and the pricing of Moutai, which serve as leading indicators for stock price bottoms [2] - It suggests focusing on the current period leading up to the Mid-Autumn Festival and National Day for potential investment opportunities, as performance expectations are likely to reach a low point during this time [2] - The report indicates that the supply of Moutai during the upcoming festive season may represent the low point of pricing in this adjustment cycle [2] Group 3 - The report discusses how to assess the bottoming out of market capitalization for leading liquor companies, recommending the selection of companies with strong fundamentals and high dividend yields during counter-cyclical periods [3] - Two methods are proposed for estimating the market capitalization bottom: cautious profit assumptions for the next three years combined with required dividend yield calculations, and assessing the asset value of companies with substantial aged liquor inventory [3]