Core Viewpoint - The Chinese liquor industry is experiencing a significant divergence, with leading companies showing growth while others, like Zhenjiu Lidu, face substantial declines in revenue and profit [2][4][5]. Group 1: Financial Performance of Liquor Companies - In the first half of 2025, 22 listed liquor companies reported a total revenue of approximately 242.4 billion yuan and a net profit of about 95.1 billion yuan [4]. - Six companies, including Kweichow Moutai and Wuliangye, achieved both revenue and net profit growth, with Kweichow Moutai reporting revenue of 89.389 billion yuan, up 9.1%, and net profit of 45.403 billion yuan, up 8.9% [2]. - Conversely, Zhenjiu Lidu saw a significant decline, with revenue dropping to 2.497 billion yuan, down 39.6%, and adjusted net profit falling to 613 million yuan, down 39.3% [2][6]. Group 2: Industry Challenges - The liquor industry is undergoing a deep adjustment period characterized by high channel inventory, leading companies to adopt inventory control and price stabilization strategies [3]. - Macro-economic pressures and limited consumption scenarios have reduced consumer purchasing willingness, with liquor sales dropping 15% year-on-year during the 2025 Spring Festival, and mid-to-high-end sales declining by 20% [3]. - Intense competition and price wars among companies, particularly among smaller enterprises, are compressing profit margins and reducing overall profitability in the industry [3][5]. Group 3: Zhenjiu Lidu's Struggles - Zhenjiu Lidu is facing severe challenges, including excessive inventory turnover days at 855, far exceeding the healthy range of 450-700 days [6]. - The company relies heavily on its Zhenjiu brand, with other brands contributing minimally to revenue, and has seen a consistent decline in core product sales over the past four years [6][7]. - The decline in sales reflects weakened product competitiveness and shrinking consumption scenarios, with the company struggling to adapt its product structure and marketing strategies [7]. Group 4: Strategic Responses - Zhenjiu Lidu is attempting to navigate its challenges by launching new products, such as the "Da Zhen·Zhenjiu," priced at 600 yuan, targeting middle-class families and small business owners [8]. - The company is also implementing a "Ten Thousand Merchants Alliance" strategy to expand its dealer network and create a broad channel ecosystem [8]. - Additionally, Zhenjiu Lidu is entering the craft beer market with its "Niu Shi" brand, seeking to establish a second growth curve amid the liquor industry's stagnation [9][10]. Group 5: Market Entry Challenges - The craft beer market is highly competitive, dominated by established players like China Resources and Budweiser, posing significant challenges for new entrants like Zhenjiu Lidu [11]. - Transitioning from liquor to beer requires Zhenjiu Lidu to reconfigure its sales channels, as beer distribution is more diverse and includes restaurants and bars, unlike the traditional liquor sales model [12]. - While seeking new growth avenues is a reasonable strategy, the differences in product, channel, and consumer demographics between liquor and beer present substantial hurdles for successful cross-industry expansion [12].

Core Viewpoint - The liquor industry is entering a deep adjustment period, with high-end liquor market prices declining, which has squeezed the survival space of mid-to-high-end brands [1] Financial Performance - Zhenjiu Lidu (06979.HK) reported a revenue of 2.497 billion RMB for the first half of 2025, a year-on-year decline of 39.6% [2] - The company's net profit attributable to shareholders was 575 million RMB, down 23.5% year-on-year, while adjusted net profit decreased by 39.8% to 613 million RMB [2][6] - The core brand Zhenjiu saw revenue drop by 44.8% to 1.492 billion RMB, with sales volume falling from 6,932 tons to 4,612 tons [6][11] Brand Performance - All four major brands (Zhenjiu, Lidu, Xiangjiao, and Kaikouxiao) faced pressure, with Zhenjiu's revenue contributing less than 60% to the total [3][7] - Lidu, considered the "second growth curve," had the smallest revenue decline among the brands, achieving 611 million RMB, a decrease of 9.4% [9] - Xiangjiao and Kaikouxiao experienced significant revenue reductions of 38.7% and 63.9%, respectively [10] Market Trends - The high-end product revenue share for Zhenjiu Lidu decreased from 26.4% to 23%, indicating a shift in product structure towards mid-range and lower products [11] - The average selling price for Lidu dropped over 29% to 348,000 RMB per ton, reflecting a trend of price reduction in the market [10] Strategic Initiatives - The company plans to launch a new product, "Da Zhen・Zhenjiu," aimed at becoming the "second Flying Moutai," with a target price of 600 RMB per bottle [13][15] - A "Wanshang Alliance" plan is being initiated to recruit over 10,000 partners to build a profit-sharing community, despite a reduction in the number of distributors [15]

Core Insights - The Chinese liquor industry is currently facing significant challenges due to a combination of policy adjustments, changes in consumer behavior, and intense competition, leading to decreased demand, falling prices, weakened consumption scenarios, and high inventory levels [1] - Many listed liquor companies have reported poor performance in the first quarter, with notable declines in revenue and profits [1][2] Industry Performance - Six A-share liquor companies have issued profit warnings for the first half of the year, with Water Well expected to see a revenue decline of 12.84% and a net profit drop of 56.52%, while other companies like Jiu Gui and Huang Tai are also experiencing significant losses [1] - The overall performance of the liquor industry is undergoing a phase of adjustment, which is seen as a natural response to the current market pressures [3] Resilience and Recovery - The liquor industry has historically shown resilience and the ability to recover from downturns, with companies that survive downturns often reaching new heights in subsequent cycles [5] - Companies with strong fundamentals, such as Zhen Jiu Li Du, are expected to perform better during this adjustment period due to their stable market position and proactive strategies [7] Strategic Innovations - Zhen Jiu Li Du is adapting to market changes by launching products that offer high quality at competitive prices, such as the "Da Zhen・Zhen Jiu," which targets consumers seeking value [9] - The company is also reforming its distribution channels by collaborating with high-quality distributors and exploring new sales avenues, including corporate group purchases and cross-industry partnerships [9] Market Outlook - The global capital market is experiencing volatility, but there is optimism for recovery, with significant gains in major indices since April [10] - The liquor sector is currently undervalued, with a low fund holding ratio and attractive dividend yields, making it a potential target for investment as market conditions improve [11][14] Investment Appeal - Zhen Jiu Li Du's current valuation is competitive compared to leading A-share liquor companies, and its strong cash flow and dividend history enhance its attractiveness to investors [15] - The combination of low valuation and resilient performance positions Zhen Jiu Li Du favorably in a turbulent market, likely attracting more investment [15][17] Conclusion - Despite current challenges, the liquor industry is expected to rebound as economic conditions improve and consumer confidence returns, with Zhen Jiu Li Du positioned to lead this recovery [16][17]