League of Nations Securities: Liquor brand differentiation continues under weak recovery, beer cost dividends continue to be realized

Zhitong Finance App learned that Guolian Securities released a research report saying that overall business demand is still recovering, and demand for ultra-high-end liquor is resilient. Overall sales of high-end liquor are expected to maintain steady growth in 2024Q3 but slow slightly from month to month; demand in the sub-high-end price band is weak, and sales in the high-end industry are expected to decline slightly in 2024Q3. Among them, brand differentiation has intensified, and Fenjiu is leading the marketing industry. In terms of beer, in January-August, China's cumulative beer production fell 1.20% year on year. The Q4 base declined further, and industry output is expected to return to positive growth. From the cost side, the main raw materials continued to decline or stabilize at a low level in Q3, and the cost dividend for beer companies was further realized.

Guolian Securities's main views are as follows:

Liquor: Business demand is still recovering, and price fluctuations in Maotai release risks

Investment data declined slightly from the same month to the second quarter. Since the end of September, macroeconomic policy shifts, a series of “one bank, one game, one meeting” announced a series of policies that exceeded expectations, and the Politburo meeting clearly adjusted to stimulate the economy. It is expected that with macroeconomic improvements and the real estate investment side's drag on the economy is effectively mitigated, improving corporate profits will drive a gradual recovery in commercial consumption, and real sales of liquor companies are expected to usher in opportunities for improvement. Maotai's pricing has changed many times this year, further releasing the pressure on the industry's inventory. The batch prices of Wuliangye and Guojiao 1573 are all relatively stable. Currently, there is a large price gap between Pu 5 and Flying Sky. There is no direct correlation, and the cost of other products represented by Pu 5 may support the price.

Liquor: Popular demand is more rigid, and popular prices increase brand concentration

Guolian Securities said that the Mid-Autumn Festival was weak, and the National Day banquet market performed well. Compared with the Mid-Autumn Festival, there are rewards for small gatherings such as restaurants. According to the Ministry of Commerce, sales of key national monitoring catering companies during the three-day Mid-Autumn Festival holiday increased 6.5% year-on-year. According to Meituan data, dine-in dining during the Mid-Autumn Festival holiday increased by nearly 20% compared to the previous year's holiday, and the average daily dine-in consumption during the first 5 days of the National Day holiday increased by 33.4% over the same period last year. There has been no significant decline in the amount of alcohol consumed by the public, demand in the mass price band is more rigid, the performance of regional leaders is still steady, and sales of leading products worth 100-300 yuan are still growing. Recently, intensive policy catalysis has further unleashed, and the further release of consumer consumption potential is expected to drive the continued high-quality growth of branded wines.

Liquor: Brand differentiation continues under weak recovery, leading concentration increases

High-end wine: Overall business demand is still recovering, and ultra-high-end demand is resilient. Overall sales of high-end wine are expected to maintain steady growth in 2024Q3 but slow slightly from month to month.

Sub-high-end: Demand in the sub-high-end price band is weak. It is expected that sales in the high-end industry will decline slightly in 2024Q3. Among them, brand differentiation will intensify, Fenjiu is the leading industry in marketing, and stocks of concessions and alcoholics have yet to be eliminated.

Regional alcohol: Consumer consumption remained resilient in Q3. The growth pressure of regional leaders was relatively low. The price band of 100-300 yuan led the industry. Liquor companies with leading channel profits are expected to improve, and wine companies with leading channel profits, such as Gujing, Jinshiyuan, Yingjia, and Laobaigan, are expected to perform better.

Beer: Volume is under slight pressure, and the cost dividend continues to be realized

From January to August 2024, China's cumulative beer production fell 1.20% year on year. The Q4 base declined further, and industry output is expected to return to positive growth. On the consumer side, it is expected that the overall volume of the industry will still be under pressure in Q3 due to poor customer flow from catering and entertainment channels and active inventory control by enterprises. Looking at the price segment, the 6-8 yuan price band products are more resilient. Overall, upgrades continue to slow down. As macroeconomic policies strengthen, the volume and price of beer is expected to recover. In terms of cost, the main raw materials continued to decline or stabilize at a low level in Q3, and the cost dividend for beer companies was further realized.

Investment advice: Preferably evaluate targets that are cost-effective and have a high degree of report fulfillment

Liquor: The liquor industry is driven by a gradual shift from the demand side to the supply side. Looking forward to a slowdown in demand growth in the future, there is still plenty of room for improvement in concentration. Currently, considering the dividend rate+performance growth rate, the sector's valuation safety margin is high. As the denominator drive strengthens, industry valuations are expected to gradually bottom out. Preferably rated targets with cost-effective and steady Q3 performance, starting with Kweichow Moutai (600519.SH) and Wuliangye (000858.SZ), which have high brand barriers, followed by Shanxi Fenjiu (600809.SH), Luzhou Laojiao (000568.SZ), Laobai Dry Liquor (600559.SH), Yingjiangjiangjiu (), Gujing Gongjiu (000596.SZ), etc., and it is recommended to focus on Shede Liquor () (000799). 603198.SH 603369.SH 600702.SH SZ), Goldseed (600199.SH).

Beer: The Q4 base has declined further, and the volume and price of the industry is expected to recover, and the cost dividend is expected to be further reflected. We recommend undervalued leaders Tsingtao Brewery (600600.SH), China Resources Brewery (00291), and Yanjing Brewery (000729.SZ), which is expected to be reformed. It is recommended to focus on Chongqing Beer (600132.SH).

Risk warning: risk of macroeconomic failure to meet expectations, risk of increased industry competition, risk of food safety