GF Securities: 25Q3 liquor companies' reporting level differentiation increases the liquor industry enters the inventory removal cycle

The Zhitong Finance App learned that GF Securities released a research report saying that in the third quarter, the reporting level differentiation of wine companies increased, and leading wine companies with strong brands still showed strong resilience. Companies such as Wuliangye and Furujing have accelerated adjustments, and channels have entered the storage cycle, stabilized the prices of core products, and strengthened dealer confidence. Some liquor companies that first slowed down and adjusted in the second quarter continued the previous trend, and their performance was highly consistent with actual sales. Some high-end wine companies that entered the adjustment period earlier performed relatively well in terms of revenue performance under a low base; according to feedback from dealers in many places, the decline in liquor sales since August has narrowed significantly compared to June-July. As the pressure on performance in the third quarter continues to be released, liquor companies are expected to go light and achieve high-quality development in the coming year.

The main views of GF Securities are as follows:

Revenue side: Continued adjustments under pressure from demand, increasing differentiation among wine companies

High-end wine: Maotai showed resilience, and Wuliangye pragmatically slowed down. The three high-end wine companies achieved total revenue of 2150/54.7 billion yuan in 25Q1-Q3/25Q3, or -0.2%/-15.0% year-on-year. Among them, Kweichow Moutai/Wuliangye/Luzhou Laojiao 25Q3 revenue was +0.3%/-52.7%/-9.8%, respectively.

Real estate wine: Continuous adjustment, strong consistency between performance and actual sales. Under pressure from Q3, most real estate wine companies continued to slow down and adjust and relieve channel pressure. 25Q1-Q3/25Q3 real estate wine revenue was -23.1%/-36.5%, respectively.

Sub-high-end wine: It performs relatively well at a low base, and Fenjiu shows strength. The revenue of high-end wine companies in 25Q1-Q3/25Q3 was -2.6%/-8.8% year-on-year. Under a low base, Shede Liquor and Alcoholic Liquor performed relatively well. Fenjiu showed strong resilience, and Shuijingfang continued to eliminate channel inventory.

Profit side: The scale effect weakens under rigid spending, and profit levels fall

Gross profit margin: Under pressure from demand, the product structure of liquor companies has generally declined, sales have increased, and most liquor companies' gross margins have declined by varying degrees. Cost side: The overall sales tax ratio for the 25q1-Q3 sector was +0.3 pct to 15.2% year over year. Under pressure from demand, wine companies have increased their sales expenses to promote marketing. At the same time, due to the rigidity of some personnel expenses, the sales expenses rate and management expense ratio of most wine companies in the sector increased year-on-year in the third quarter. Taken together, the profit level of liquor companies generally declined under pressure due to factors such as weakening scale effects, increased cost competition, and declining product structures.

Stock price level: After the profit forecast was revised down, the current PE valuation of most wine companies in 2025 is in the 15-20 times range

After the disclosure of the third quarterly report, the market once again revised the 2025 profit forecast for liquor companies. If the valuation is calculated using the 2025 EPS calculation based on current Wind's unanimous expectations (leading forecast for the past 30 days), the current PE valuations of leading high-end wine and real estate wine companies are mostly in the 15-20x range.

Investment advice

From a fundamental perspective, after a four-year adjustment period, liquor is expected to experience a “valuation+performance” double bottom in 2025. The ratio of sector dividends to the yield on ten-year treasury bonds is high, and the allocation is cost-effective. I am optimistic about the recovery of demand after the industry clears up. Core recommendations: Shanxi Fenjiu (600809.SH), Luzhou Laojiao (000568.SZ), Shede Liquor (600702.SH), Jinshiyuan (603369.SH), Gujing Gongjiu (000596.SZ), and Kweichow Moutai (). 600519.SH

Risk Alerts

The pace of economic recovery remains to be seen, the recovery in consumption power falls short of expectations, and food safety issues.