Summary of the White Liquor Industry Conference Call Industry Overview - The white liquor industry is experiencing significant profit declines, with a 7% drop in profits for the first three quarters of 2025, and an 18% drop when excluding Moutai [1][2] - The industry saw a 22% profit decline in Q3 2025, with a staggering 48% drop when excluding Moutai [1][2] - The China Securities White Liquor Index has underperformed the CSI 300 Index for three consecutive years, with a 2023 underperformance of 8%, 2024 of 32%, and 27% from the beginning of 2025 to the end of October [1][3] Financial Performance - The valuation of the white liquor sector has been continuously declining since 2021, with most companies expected to see a profit decline of 20%-50% in 2025 [1][5] - The dynamic PE valuation has not significantly changed compared to the previous year, indicating challenges in valuation recovery [1][5] - The overall revenue for the industry in 2025 is projected to decline, with a 6% drop in the first three quarters and a 13% drop when excluding Moutai [2] Market Dynamics - The industry is in the early stages of a second round of clearing, with a slowdown in dealer payment speeds; for example, the payment speed for Laojiao dropped from 90% to 60% [1][6] - Major brands like Wuliangye are experiencing similar issues, with post-Mid-Autumn payment speeds only at 60%-70% [1][6] - Moutai's sales volume is expected to decline by about 10% in 2025, with non-standard products dropping over 20% [1][9] Investment Perspective - The white liquor sector has shown poor investment performance over the past few years, with no segment outperforming the index [3][4] - The current market is characterized as cyclical and lacking growth potential, suggesting that high expectations for the industry should be tempered [7][8] - Even if there is a short-term demand rebound, it is unlikely to change the long-term cyclical nature of the industry [8] Pricing and Profitability - Moutai's annual price has decreased by 600 yuan since 2023, but dealers are not incurring losses due to the factory price not being inverted [10][11] - Wuliangye's price has dropped significantly, leading to dealer losses and a 9% decline in Q3 net profit [11][12] - Most traditional dealers still maintain some profit margins, with Moutai's single product profit remaining close to 100 yuan [12] Future Outlook - The growth prospects for the white liquor industry are challenging, with dealers reluctant to make payments due to declining prices [13] - The high-end liquor market is expected to face increased competition, necessitating strategic adjustments from brands [13] - The overall price range in the industry has contracted by 20%, with sales volumes declining across various price segments [20] Strategic Initiatives - White liquor companies are attempting new strategies, such as introducing lower-alcohol products to attract younger consumers, but these efforts have not yielded significant results [17] - The high-end liquor market is under pressure, with a lack of conditions for significant price increases in the long term [19] Conclusion - The white liquor industry remains a critical component of China's consumer market, but investors should approach it with caution due to current market dynamics and potential future challenges [31][32] - Long-term confidence in quality companies is essential, but a rational investment mindset is necessary given the industry's cyclical nature and current performance trends [31][32]

Group 1: Market Performance - The food and beverage sector experienced a significant pullback on September 18, with the Food ETF (515710) dropping over 2% during intraday trading before closing down 1.41% [1] - Major liquor stocks, including Shede Liquor, Yanghe Brewery, and Luzhou Laojiao, saw declines exceeding 2%, while leading brands like Kweichow Moutai and Wuliangye fell over 1% [1] Group 2: Investment Trends - Despite the recent pullback, there has been a notable influx of capital into the food and beverage sector, with the Food ETF (515710) recording a net subscription of 24.1 million CNY over the past five trading days [1] - The food and beverage sector is currently viewed as having a favorable valuation, with the Food ETF's underlying index PE ratio at 21.12, placing it at a low point historically [4] Group 3: Industry Outlook - Kweichow Moutai ranked third in the Kantar BrandZ Most Valuable Chinese Brands 2025 list, with a brand value of 80.023 billion USD, marking its sixth consecutive year in the top three [3] - Analysts suggest that as policy pressures ease, there is potential for a weak recovery in demand for liquor, particularly with the upcoming holiday season expected to improve sales [3][6] - The liquor industry is seen as being at a low valuation point, with expectations for gradual improvement in fundamentals as the market stabilizes [4][6]

Core Viewpoint - The white liquor sector has seen a significant increase in stock prices, with a notable rise in the index by over 13% since August, driven by investor interest amid low valuations and recent institutional buying activity [1][2][6]. Group 1: Market Performance - As of August 29, several white liquor stocks have shown strong performance, with Jinhuijiu rising over 6%, and others like Shede Liquor and Gujing Gongjiu increasing by over 4% [1][2]. - The white liquor index has increased by more than 13% since the beginning of August [1]. Group 2: Institutional Investment - Central Huijin has increased its holdings in white liquor ETFs, acquiring 121 million shares, bringing its total to 581 million shares, making it the third-largest holder [4][5]. - This move is seen as a long-term strategy to stabilize the market, particularly in the context of the white liquor sector's recent downturn [6]. Group 3: Financial Performance of Companies - Many white liquor companies have reported significant declines in revenue and profit for the first half of 2025, with companies like Kuaijiu and Shede Liquor experiencing double-digit drops [7][9]. - In contrast, leading companies like Kweichow Moutai and Wuliangye have reported growth, with Kweichow Moutai achieving a revenue of 91.094 billion yuan, up 9.16% year-on-year [10][11]. Group 4: Industry Trends - The white liquor industry is facing challenges, with a reported 5.8% decline in production for the first half of 2025 and increasing inventory issues among distributors [12]. - The average inventory turnover days have reached 900 days, indicating potential overstocking and pricing issues [12]. - Analysts suggest that the industry may be approaching a cyclical bottom, with expectations for a recovery in performance by mid-2026 [13].

Investment Rating - The investment rating for the liquor sector is "Outperform the Market" [1] Core Insights - The report indicates that external positive factors are gradually increasing, with liquor sales improving since August. The second quarter saw a significant decline in consumption scenarios due to policy impacts, but the situation has started to recover with normal personal consumption and gatherings [2][3] - The performance of Moutai in the mid-year report shows resilience, reflecting the industry's focus on maintaining market order amid demand pressures. Moutai's revenue for the first half of 2025 increased by 9.2% year-on-year, indicating a strategic adjustment in product structure and market investment [2][3] - The report anticipates that the valuation of the liquor sector will enter a phase of oscillation and recovery, with expectations of improved demand and inventory stabilization as the market adjusts to new consumption patterns [3] Summary by Sections 1. Market Overview - The report highlights that the liquor sector has faced significant demand pressure, but the worst phase appears to have passed, with expectations for improved sales during the upcoming Mid-Autumn and National Day holidays [2][3] - The report notes that the price of Moutai has remained stable around 1900 yuan, with a projected year-on-year decline in price expected to bottom out [3][9] 2. Company Performance - Moutai's mid-year performance reflects a 9.2% increase in revenue, with strategic adjustments to product offerings and market engagement [2][18] - Wuliangye has seen its price drop to approximately 845 yuan, indicating pressure on high-end liquor demand, but there are signs of recovery in sales as consumer behavior improves [19] - Luzhou Laojiao's price for its premium product has stabilized at around 835 yuan, demonstrating the company's ability to manage supply and demand effectively [20] 3. Investment Recommendations - The report recommends a portfolio including Luzhou Laojiao, Shanxi Fenjiu, and Gujing Gongjiu for August [4]

Group 1: Industry Overview - The second quarter marks the traditional off-season for the liquor industry, compounded by increasing environmental uncertainties, leading to a decline in stock prices within the sector [2][5] - The market is experiencing a consensus on deceleration, with individual stock alpha diminishing, as major liquor companies exhibit a rational growth attitude during shareholder meetings [2][3] Group 2: Pricing and Demand Dynamics - The price of high-end liquor, such as Feitian Moutai, has shown a downward trend due to weak demand, with prices dropping to around 2000 yuan [7][13] - The impact of government policies, such as the "Party and Government Agencies Strictly Save and Oppose Waste Regulations," has affected business consumption scenarios, leading to a subdued demand environment [2][3] Group 3: Company-Specific Insights - Guizhou Moutai is expected to achieve a revenue growth target of approximately 9% for 2025, with a focus on expanding sales channels and enhancing consumer engagement [21] - Wuliangye has faced pressure on its pricing, with the price of its flagship product, Pu Wuliangye, declining to 910 yuan, while the company emphasizes maintaining price stability and supporting distributor profits [22] Group 4: E-commerce and Market Trends - The entry of instant retail platforms has significantly boosted online liquor sales, with major brands experiencing substantial growth during the "618" shopping festival [14][18] - The competition in pricing during the "618" event has intensified, impacting traditional distribution channels as e-commerce platforms offer aggressive discounts [18][19]