Orient: Consumer environment is weak, liquor companies are cautious about investment, it is expected that liquor distributors will have a moderate enthusiasm for collections before the holiday.

Orient released a research report stating that the performance of the liquor industry has steadily passed through the performance period, and the trend of differentiation in sales is still obvious. Overall, the demand for high-end liquor continues to be resilient, and performance is relatively strong; regional leaders continue to benefit from the popular price band dividend. The impact of a soft consumption environment on secondary high-end liquor enterprises is relatively large, with liquor companies such as Shede (600702.SH) taking the initiative to stabilize prices by reducing speed. The peak season of Mid-Autumn Festival and National Day is approaching, and liquor companies are generally entering delivery time; considering the soft consumption environment, it is expected that liquor companies will be more cautious in investment actions, and the enthusiasm of distributors for payment collection is average. The domestic fresh milk prices continue to trend downward, while the prices of powdered milk and cheese remain relatively stable at low levels. Macroeconomic data update: Overall, macroeconomic data related to consumption continue to show an increasing trend. In July 2024, the total social retail sales, social catering revenue, tobacco and alcohol retail sales, and beverage retail sales increased by 2.7%, 3.0%, -0.1%, and 6.1% year-on-year, respectively. According to the financial data released in July, domestic M2 monthly year-on-year growth was 6.3%, with a monthly social financing scale of 0.77 trillion yuan, an increase of 0.24 trillion yuan year-on-year, while the stock of social financing maintained an 8% growth rate. Liquor wholesale price data: As of September 5th, according to Wind and today's liquor price data, the wholesale prices of bulk Feitian Maotai and bottled Feitian Maotai reached about 2610 yuan and 2365 yuan respectively; the wholesale prices of Puwu and Guojiao 1573 were around 960 yuan and 870 yuan respectively, with slight declines in the prices of Feitian Maotai in bulk and bottles and stable prices of Guojiao and Puwu. In terms of the main secondary high-end product prices, the price of Jiugui Hongtan decreased, while the rest remained stable. Beer quantity and price data: In July 2024, domestic beer production in the same month decreased by 5.1% year-on-year, while the cumulative increase from January to July was 1.4%. The average import price of domestic barley continued to decline marginally, with an average import price of 256 US dollars per ton in July 2024, a decrease of 26% year-on-year. The price of domestic corrugated paper also continued to decline, with an average ex-factory price of about 2,664 yuan per ton as of the week ending August 23, 2024, a year-on-year decrease of 18%. As of the week ending August 31, 2024, the continuous settlement price for glass futures reached 1114 yuan per ton, a year-on-year decrease of 41%. The price of aluminum in the Yangtze non-ferrous metals market remained in a growth trend, with the average price of aluminum in the Yangtze non-ferrous metals market reaching about 19,710 yuan per ton as of the week ending August 31, 2024, a 3% year-on-year increase. Dairy product price data: The price of fresh milk in China continues to decline, while the prices of powdered milk and cheese remain relatively stable. As of August 29, 2024, the average price of fresh milk in the main producing areas in China was about 3.17 yuan per kilogram, a decrease of 15.7% year-on-year. Referencing GDT data, as of September 3, 2024, the average winning prices for whole milk powder and skimmed milk powder were 3396 and 2753 US dollars per ton, respectively, with changes of -2.5% and +4.4% compared to half a month ago; on September 3, 2024, the average contract price for cheese was 4324 US dollars per ton, an increase of 1.2% from half a month ago. According to the Ministry of Commerce, as of August 30, 2024, the retail prices of milk and yogurt were 12.19 yuan per liter and 15.78 yuan per liter, respectively, representing a decrease of 0.08% and 0.13% compared to the previous week. Investment recommendations and targets Market attention to cyclical sectors has increased, and it is recommended to focus on opportunities for recovery in sectors such as liquor and beer. In the liquor sector, attention is advised to Wuliangye Yibin (000858.SZ, Buy) which has good sales and rising wholesale prices, Luzhou Laojiao (000568.SZ, Buy) with a stable brand strength, Shanxi Xinghuacun Fen Wine Factory (600809.SH, Buy) with good sales and firm wholesale prices, and excellent regional liquor companies with strong performance in their home provinces and potential for national expansion such as Anhui Gujing Distillery (000596.SZ, Buy), Jiangsu King's Luck Brewery Joint-Stock (603369.SH, Buy), and Hebei Hengshui Laobaigan Liquor (600559.SH, Buy). The beer sector benefits from the decline in imported barley prices, reducing cost pressures, and attention is advised on Tsingtao Brewery (600600.SH, Buy) with smoother structural upgrading. Risk warning: Consumption recovery progress is slower than expected, regional economic growth slows down, and risks of food safety incidents.