Orient: Luzhou Laojiao and Shanxi Xinghuacun Fen Wine Factory announce mid-year dividends, balancing cyclical resilience and dividend attributes in the liquor industry.

Orient release research report that Luzhou Laojiao and Shanxi Xinghuacun Fen Wine Factory announced mid-term dividends, the liquor sector actively distributes dividends to build a high safety margin, balancing pro-cyclical elasticity and dividend attributes. Among them, Shanxi Xinghuacun Fen Wine Factory has announced their mid-term profit distribution plan for the first time, increasing its attractiveness in terms of dividend yield. Recently, the Shenzhen Stock Exchange launched the special work "Rational Investment with Me", targeting market speculation activities, benefiting fundamentally healthy and larger market cap targets, with the liquor sector prioritizing the layout of relatively strong fundamentals, still possessing industry-leading growth potential in the next 1-2 years. Key points from Orient are as follows: Luzhou Laojiao simultaneously announced a mid-term dividend plan and a company market value management system. On the evening of December 24, 2024, the company announced the 2024 mid-term profit distribution plan, proposing to distribute a cash dividend of 13.58 yuan (including tax) per 10 shares to all shareholders based on the existing total share capital of 1.47 billion shares, totaling approximately 2 billion yuan (including tax). Based on data as of December 25, 2024, the market's consensus expectation for the company's 2024 net profit attributable to shareholders over the past 30 days is 13.96 billion yuan. Assuming the company maintains its annual dividend ratio of 60% for 2023, the expected full-year dividend yield for 2024 is approximately 4.37%. If the company increases its dividend ratio to 65%, the corresponding full-year dividend yield for 2024 would be 4.74%, increasing the attractiveness of dividends. Additionally, the company has officially announced a market value management system, reflecting a high degree of emphasis on enhancing the company's investment value and shareholder return capability. Shanxi Xinghuacun Fen Wine Factory announced their mid-term profit distribution plan for the first time, increasing the attractiveness of their dividend yield. On the evening of December 24, 2024, the company announced the 2024 mid-term profit distribution plan, proposing to distribute a cash dividend of 2.46 yuan (including tax) per share to all shareholders, totaling approximately 3 billion yuan (including tax). Based on data as of December 25, 2024, the market's consensus expectation for the company's 2024 net profit attributable to shareholders over the past 30 days is 12.45 billion yuan. Assuming the company maintains its annual dividend ratio of 51% for 2023, the expected full-year dividend yield for 2024 is 2.76%. If the company increases its dividend ratio to 60%, the corresponding full-year dividend yield for 2024 would be 3.24%, both higher than the ten-year national bond yield (1.73%). The liquor sector actively distributes dividends to build a high safety margin, balancing pro-cyclical elasticity and dividend attributes. Recently, the Shenzhen Stock Exchange initiated the special work "Rational Investment with Me", targeting market speculation activities, assisting in the return of value investing, benefiting fundamentally healthy and larger market cap targets. Liquor sector with large market capitalization and high dividend stocks are expected to benefit. As of December 25, 2024, among the listed liquor companies, Jiangsu Yanghe Distillery, Luzhou Laojiao, Anhui Kouzi Distillery, Kweichow Moutai, and Wuliangye Yibin have relatively leading dividend yields (in the past twelve months) of 5.6%, 4.15%, 3.79%, 3.56%, and 3.25% respectively, significantly higher than the current ten-year national bond yield. Investment recommendations and targets Liquor: The liquor sector has both pro-cyclical and dividend attributes, benefiting from the current investment environment. Recommended to prioritize the layout of relatively strong fundamentals in the liquor sector, with industry-leading growth potential in the next 1-2 years. Recommend Jiangsu King's Luck Brewery Joint-Stock (603369.SH), Shanxi Xinghuacun Fen Wine Factory (600809.SH), and Anhui Yingjia Distillery (603198.SH). Also optimistic about the investment reversal logic, recommending the strategic layout of discounted valuation and performance expectation reversal elastic targets, such as Luzhou Laojiao (000568.SZ) in the high-end liquor and Shede Spirits (600702.SH) in the national sub-high-end liquor. Beer: Expected to benefit from the recovery of the on-trade channel under a low base, with recovery potential in both volume and price in 2025. Recommended U8 strong growth, Beijing Yanjing Brewery (000729.SZ), and Tsingtao Brewery (600600.SH) benefiting from the post-de-stocking low base and the recovery of the dining chain next year. Also recommended Chongqing Brewery (600132.SH), which is expected to benefit more from the recovery of the on-trade channel due to lower market expectations. Dairy products: Pay close attention to Inner Mongolia Yili Industrial Group (600887.SH). If the milk price cycle reverses, it is expected to see profit and valuation growth, with significant potential. Risk warnings: Dividends may not meet expectations, consumption may not meet expectations, product structure upgrade may not meet expectations, cost increase risks, food safety incident risks.