CITIC SEC: The liquor industry is rapidly bottoming out, optimistic about the opportunity for liquor bottom allocation.

CITIC SEC released a research report stating that the liquor industry is bottoming out. Considering factors such as current inventory, prices, policy impacts, recovery of consumption scenarios, and financial reports of listed companies, CITIC SEC believes that the industry fundamentals are expected to bottom out in the third quarter of 2025. It is predicted that the third quarter of this year will see the greatest pressure on industry sales, prices, and market confidence, while the second half of this year will see the greatest pressure on the financial performance of listed liquor companies. Taking into account the clear trend of gradual recovery in the future, CITIC SEC is optimistic about the investment opportunities in the liquor industry. The beer industry is expected to maintain a stable performance in the third quarter due to a lower base in the second half of the year. Key points from CITIC SEC: - Valuations have fallen to long-term lows, increasing shareholder returns and enhancing investment safety margins. - From 2025 to date (1/1/2025~9/12/2025), the overall stock prices of the liquor sector have increased by 1.1%, lagging behind the Shanghai and Shenzhen 300 Index by 13.8ppts. This week (9/8/2025~9/12/2025), Jiugui Liquor (+5.57%), Anhui Gujing Distillery (+3.78%), and Shanxi Xinghuacun Fen Wine Factory (+3.11%) were the top three liquor companies in terms of stock price increases. The overall price-earnings ratio (TTM) of the liquor sector has fallen to 19.9x, placing it at the 60%/26%/16%/10%/17% percentile over 1 year/3 years/5 years/10 years/since listing; the overall price-earnings ratio (TTM) of the beer sector is 22.8x, placing it at the 3%/4%/2%/1%/1% percentile over 1 year/3 years/5 years/10 years/since listing. - Liquor: Leading companies emphasize high-quality development, with the release of strong aroma low-proof products highlighting the determination of leading companies to adapt to changes. - The liquor industry is currently in the bottoming out phase of the third major cycle in the past thirty years. We believe that this round of the liquor cycle shares many similarities with the liquor industry from 2012 to 2016 in terms of the economic environment, price and inventory trends in the liquor industry, financial performance of listed companies, policy changes, and capital market performance. It is expected to gradually experience clearance and subsequent recovery. From the timing perspective, based on the performance briefing of Moutai after the interim report and the statements made by Wuliangye Yibin at the liquor expo, leading companies will continue to optimize market strategies, actively maintain the resilience of channel ecology, and keep the overall market stable and channels in a healthy synergy. In terms of customer groups, liquor companies are mentioning young people more frequently and seeking breakthroughs in taste and scenarios. Shede, Wuliangye Yibin, and Anhui Gujing Distillery have successively launched 29 new products, demonstrating unprecedented attention to developing new scenarios and new customer groups in the industry. - Mid-Autumn Festival and National Day are expected to improve sales compared to the previous period, with distributors adapting to the new normal. - According to industry media reports such as JiuYeJia and JiuShuo, we believe that terminal sales in the overall industry have been gradually recovering since August. With the approaching peak season of Mid-Autumn Festival and National Day, various manufacturers have actively introduced various incentives and banquet policies to boost industry confidence. We expect the decline during the two festivals to narrow to -10%~0%. High-end liquor: Based on the performance briefing of Moutai, Kweichow Moutai also indicated a slight rebound in terminal sales in August compared to June and July. Distributors such as Moutai and Wuliangye Yibin are gradually adapting to the new normal, achieving stable destocking; Mid-range liquor: Distilleries are more focused on promoting sales, with the pace of incentives slower than the same period, entering a cycle of inventory digestion; Local liquor: consolidating the local market, using digital means to enhance operational efficiency. - Risk factors: - Consumer demand may not meet expectations; increased competition in the liquor and beer industries; core product prices in the liquor industry may underperform the market; inventory risk in liquor industry channels; slower-than-expected recovery in catering consumption; food safety issues, etc. - Investment strategy: - We believe that the liquor industry is quickly bottoming out. Considering factors such as current inventory, prices, policy impacts, recovery of consumption scenarios, and financial reports of listed companies, we believe that the industry fundamentals are expected to bottom out in the third quarter of 2025. We predict that the third quarter of this year will be the stage with the greatest pressure on industry sales, prices, and market confidence, while the second half of this year will see the greatest pressure on the financial performance of listed liquor companies. Considering the clear trend of gradual recovery in the future, we are optimistic about the investment opportunities at the bottom of the liquor industry. With a lower base in the second half of the year for beer, we expect the performance in the third quarter to remain stable.