Investment Rating - The report maintains a strong buy recommendation for leading companies in the liquor sector, including Guizhou Moutai, Wuliangye, and Luzhou Laojiao, while suggesting a hold for Yingjia Gongjiu and Jinhuijiu [10][9]. Core Insights - The liquor industry is undergoing a significant clearing phase due to the impact of the "ban on alcohol" policy, with second and third-tier companies facing substantial challenges, while leading firms show resilience [1][9]. - The report anticipates that the financial statements of leading liquor companies will signal an industry turning point, potentially reshaping market expectations and indicating a gradual emergence of the industry bottom [9][1]. - The demand for liquor is expected to continue recovering, driven by a positive price index in 2026, which may lead to inflation and increased corporate profitability [1][9]. Revenue and Net Profit - In Q2 2025, the liquor industry reported revenues of 881 billion yuan, a year-on-year decrease of 5.0%, and a net profit of 312 billion yuan, down 7.5% [2][13]. - For the first half of 2025, the industry generated revenues of 2,415 billion yuan, with a slight year-on-year decline of 0.9% in revenue and 1.2% in net profit [2][13]. - Excluding Moutai, the industry's revenue in Q2 2025 was 484 billion yuan, reflecting a more significant decline of 13.1% [2][13]. Profitability - The overall gross margin of the liquor sector is under pressure due to declining prices and structural changes, with high-end liquor experiencing a slight decrease in gross margin [4][28]. - Many companies have increased their expense ratios to cope with price declines and intensified competition, although some have managed to reduce costs through digitalization and refined channel management [4][28]. Investment Recommendations - The report suggests focusing on strong leading companies and those that have cleared their market burdens first, such as Shanxi Fenjiu and Luzhou Laojiao, while also monitoring companies like Yingjia Gongjiu and Jinhuijiu for potential growth contributions in the second half of 2025 [9][10]. - The anticipated recovery in liquor demand and the potential for improved profitability in 2026 present a favorable investment landscape for the sector [9][1].

Core Insights - Kouzi Jiao reported a significant decline in both revenue and net profit for the first half of 2025, with revenue at 2.531 billion yuan, down 20.07% year-on-year, and net profit at 715 million yuan, down 24.63% [1][3] - This marks the first time in three years that Kouzi Jiao has experienced a simultaneous decline in revenue and net profit [3] Financial Performance - Revenue for Kouzi Jiao from 2022 to 2024 was 5.135 billion yuan, 5.962 billion yuan, and 6.015 billion yuan, showing growth rates of 2.12%, 16.1%, and 0.89% respectively [3] - Net profit for the same period was 1.55 billion yuan, 1.721 billion yuan, and 1.655 billion yuan, with year-on-year changes of -10.24%, 11.04%, and -3.83% [3] - The company's cash flow from operating activities was negative 383 million yuan, a drastic decline of 9854.35% year-on-year [1] Product Performance - All product tiers of Kouzi Jiao's liquor saw sales declines in the first half of the year, with high-end products generating 2.385 billion yuan, down 19.8%, mid-range products at 32.29 million yuan, down 10.82%, and low-end products at 68.09 million yuan, down 2.59% [3] Market Analysis - Revenue from the domestic market in Anhui province was approximately 2.1 billion yuan, down 19.31%, while revenue from outside the province was 384 million yuan, down about 19.24% [4] - The number of distributors for Kouzi Jiao was 1,082, with 536 in the domestic market and 546 in the external market, indicating a focus on expanding outside the province [4] - The company's reliance on the domestic market has increased over time, with the proportion of revenue from Anhui rising from 82.43% in 2022 to 84.35% in 2024 [4] Competitive Landscape - Other liquor companies in Anhui have shown stronger performance, with Gujing Gongjiu reporting 20.151 billion yuan in revenue for the central region, up 17.8%, and Yingjia Gongjiu with 5.093 billion yuan, up 12.75% [5] - Kouzi Jiao's sales decline is attributed to the ineffectiveness of its previous marketing strategy, which relied on a "pan-in-pan" model that is no longer viable in the current market [5] Shareholder Activity - Founder Liu Ansheng is seeking to reduce his stake in Kouzi Jiao again, planning to sell up to 10 million shares, representing 1.67% of the total share capital [5][7] - This marks Liu's third round of share reduction since the end of the three-year lock-up period after the company's IPO [7] - Kouzi Jiao has set a strategic goal to double its sales over the next three years, but current performance indicates a significant gap to reach the 10 billion yuan target [7]