Guotai Junan: Baijiu gradually enters the data verification stage, industry cycle bottom share logic strengthens, prioritize finding certainty.

Guotai Junan released a research report stating that the liquor industry is still in the process of bottoming out in the current stage of the industry cycle. The deviation between supply and demand in the industry is increasing, and the inventory cycle is still unfolding. From an annual perspective, the industry is currently at the bottom of channel profits and will subsequently experience inventory and performance bottoms. The agency believes that the second quarter of 2025 is still the most critical point in the stress test for the year, and differentiation among companies may increase further. The sector is now entering the data verification stage, and stocks with strong short-term sales performance may see significant excess returns. The main theme for liquor in 2025 is market share logic. Guotai Junan believes that the stock price performance in 2025 fundamentally reflects the reshaping of the industry cycle downturn combined with individual stock growth logic: at the bottom of the industry cycle, liquor shows obvious stock competition, with the industry moving from "rising prices and quantity" to "more quantity and falling prices". Company growth is mainly driven by continuous acquisition of market share and continuous market competition, showing clear market share logic. To gain market share, three factors are needed: 1) strong brand, large capacity; 2) a rich product line, especially in the mid-tier price range; 3) strong organizational efficiency and channel structure. In the short term, focus on economic expectations; in the medium term, infer towards bond-like assets. Looking ahead, Guotai Junan Securities believes that the sector will continue to benefit in the short term from optimistic expectations of the housing market stabilizing, and consumption picking up, potentially leading to a temporary boost in valuations. Strong fundamental companies are expected to lead the way with performance support, which may then spread to high-growth targets. Considering that the industry cycle has not yet reached a solid bottom, indicators such as social financing, M2, secondary housing prices in core cities, and long-term interest rates still have guidance significance for the sector. In the medium term, the industry still needs to go through the inventory cycle phase, with a focus on market share logic. Companies that can continuously increase market share have the potential to sustain excess returns, and the industry will need to continue to experience channel profit bottoms, inventory bottoms, and performance bottoms. After achieving supply-demand balance, the market share logic will be fully interpreted, moving the sector from growth to value, transitioning from "high growth, cyclical" to "stable growth, high dividends". Risk factors: food safety, industry policy adjustments, etc.