Core Viewpoint - The report from CITIC Securities suggests that the high-end liquor industry is approaching a fundamental turning point, indicating a potential bottoming opportunity for investment as the market enters a cyclical low phase after a decade [1] Group 1: Historical Analysis - The period from 2012 to 2015 saw a significant decline in high-end liquor demand due to the "Three Public Consumption" ban, leading to a price competition that shaped the high-end brand landscape [2] - From 2016 to 2021, the rise of mass consumption and accelerated consumption upgrades resulted in both volume and price increases for high-end liquor, driven by favorable economic conditions and changing consumer preferences [2] - The period from 2022 to 2025 indicates a transition from growth to a contraction phase in the liquor industry, with leading companies managing to grow revenues despite pressures on pricing due to declining macroeconomic indicators [2] Group 2: Investment Recommendations - The liquor industry is expected to reach a turning point as policy restrictions on consumption are gradually relaxed, and the most pessimistic sales conditions are believed to be over, with expectations for improved sales by mid-year [3] - The adjustment of product strategies by leading brands like Moutai is anticipated to stabilize industry pricing, with expectations that the production volume will drop below 4 million kiloliters by 2025, marking a potential bottom for the industry [3] - The liquor sector is characterized by low expectations, low valuations, and low public fund holdings, making it a high-value investment opportunity as the market approaches a cyclical low [4] Group 3: Market Dynamics - The capital market's expectations for the liquor industry have been declining, with negative annualized returns since 2021, and the valuation levels and public fund holdings are at low points [4] - Leading liquor companies are focusing on shareholder returns through increased dividends and share buybacks, which is expected to stabilize market expectations and support stock prices [4] - High-end liquor is viewed as a key indicator of industry cycles, with leading companies likely to recover before the broader industry, suggesting a stronger performance for high-end liquor stocks [4]

Core Insights - The recent quarterly reports from listed liquor companies have shown the worst performance in a decade, indicating a significant decline in high-end liquor consumption and increased inventory pressure across channels [1][3][5] Industry Overview - The third quarter is typically a peak season for liquor consumption, with nearly 70% of annual sales occurring in the second half of the year, yet the current reports reflect a stark contrast to this trend [1] - The instability in liquor prices observed earlier in 2023 has begun to impact manufacturers, as the burden of issues has shifted from the end and middle channels back to the manufacturers themselves [3][5] Market Dynamics - The decline in sales has initially affected smaller liquor producers but has now extended to major brands, indicating a deep adjustment period for the industry [3][5] - Many top liquor companies are facing quality degradation in their products due to insufficient supply of high-quality raw materials, which may lead to significant changes in their production strategies in the coming years [5] Pricing Strategies - Liquor prices are being driven down as distributors and retailers are forced to sell at lower prices to clear inventory, with some reporting substantial losses [5][6] - E-commerce platforms are seizing the opportunity to acquire brand-name liquor at lower prices, using aggressive pricing strategies to attract customers and build loyalty [6][8] Inventory Management - The current inventory levels at major liquor brands are excessively high, leading to a lack of proactive management from manufacturers, who are unable to fulfill performance targets [8][9] - The upcoming "Double 11" shopping festival is expected to further influence market dynamics, as retailers assess pricing strategies based on consumer demand and inventory levels [8][9] Consumer Behavior - Consumers are advised to purchase liquor based on actual needs rather than speculative buying, as the current market environment is markedly different from previous years [9][14] - The ongoing adjustment period may lead to significant price drops, particularly as manufacturers clear out inventory in anticipation of future price increases [11][13]