Zhītōng Cáijīng APP learned that Huáfú Securities released a research report, believing that the direct cause of this round of Maotai's batch price fluctuations was the channel disputes caused by the 618 online promotion, but the fundamental reason is still the insufficient demand prosperity. According to Huáfú Securities' review and analysis, it is expected that under the pressure of demand, coupled with the conflict of interests between channels and other factors, there is still some pressure on the middle and short-term batch prices of Flying A due to channel conflicts, but there will not be a sustained cliff-like decline. Whether it rises or falls, the marginal changes in batch prices do not affect the company's long-term value. At present, the focus of attention should not be on the daily fluctuations in batch prices of this round, but should return to the fundamentals.

About batch pricing:

The batch pricing of core major products is the result of the comprehensive capabilities of the company under the multi-party competition of liquor companies and channels as well as market supply and demand. For high-end liquor, the batch price of a company's core product establishes the company's industry position and discourse power, and is also an important indicator for observing the company's business and stock price trend. However, as a synchronous indicator that represents the supply-demand relationship, batch pricing is not forward-looking and does not affect Maotai's reports, the company's core competitiveness, and the judgment of end consumers on product value. For the industry, since the price difference between Maotai liquor and other white liquors is relatively large, its price reduction has little effect on the overall white liquor, and it actually affects more the management and judgment of the market's future expectations.

About this round of batch price fluctuations:

Recently, there has been a sharp drop in Flying A's batch prices. Huáfú Securities believes that the direct cause of this round of Maotai's batch price fluctuations is the channel disputes caused by the 618 online promotion, but the fundamental reason is still the insufficient demand prosperity. Although the "billion-yuan subsidies" and other activities of e-commerce are not new means, they have an impact on Flying A's batch prices this time, which is due to the continuing pressure on demand, coupled with the deterioration of the e-commerce competition ecology and the increase in price competition. The damaged channels do not have a clear understanding of the joint development of the Maotai channels and the company's subsequent reform ideas, which has amplified and intensified the batch price fluctuations. According to Huáfú Securities' review and analysis, it is expected that under the pressure of demand, coupled with the conflict of interests between channels and other factors, there is still some pressure on the middle and short-term batch prices of Flying A, but there will not be a sustained cliff-like decline. In the information age, the compression of cycles on the one hand intensifies the emotional states of all parties participating in the market, making short-term performance more easily exaggerated, and making wind and grass more easily over-interpreted and causing waves, but at the same time, the symmetry of information helps companies to coordinate various channels and achieve a soft landing.

Revelations from the review of batch price fluctuations:

Reviewing the historical batch price trend of Flying A, Huáfú Securities believes that the factors affecting batch prices can be divided into three categories: 1) macro policies, consumption environment and demand changes; 2) controllable actions of Maotai as a company (such as delivery, price increases, adjustments in product structure, adjustments in channel structure, etc.); 3) channel actions that Maotai cannot directly control (including dealers at all levels, scalpers, e-commerce platforms, etc.). During the period of industry adjustment, the rational restraint of upstream liquor factories that "release water," the marginal changes in downstream demand that "receives water" are not significant, and the role of middle channels as a "reservoir" becomes stronger, plus the long channel chain of Maotai and the large number of participants, negative concerns are more likely to produce larger ripples.

Looking back at the experience of batch price fluctuations in March 2022: At that time, Shanghai, Guangdong and other places were in the midst of an epidemic outbreak, and demand prosperity and consumer confidence were under pressure. From the results, after "iMaotai" announced that it would not directly sell Pu Fei, Maotai liquor batch prices rebounded immediately on March 28, 2022, indicating that at that time, batch price fluctuations were largely due to unclear market expectations for short-term follow-up supply, rather than long-term concerns. Huáfú Securities believes that this round of batch price fluctuations will be similar to the previous round in this respect, that is, after the company intervenes and maintains the price plate, and after the future joint development between online and offline channels becomes clearer, batch prices will probably rebound and be repaired to some extent.

Looking at the experience of batch price fluctuations in August 2021: At that time, there was a negative correlation between Flying A's batch price and stock price, with high-price fluctuations in batch pricing and a decline in stock price. Huáfú Securities believes that regardless of whether the price goes up or down, the market essentially hopes that the batch price of Flying A will fluctuate within a healthy range under the premise of conforming to the melody and underlying trend of the times. Therefore, whether it rises or falls, the marginal changes in batch prices do not affect the company's long-term value. At present, the focus of attention of this round of fluctuations should not be on the daily ups and downs of batch prices, but should return to the fundamentals. In addition, the fluctuations in August 2021 also coincided with the change of leadership in Maotai. During this period, due to unclear market expectations for the new leaders' strategies, the company's actions were easily exaggerated and interpreted. With the gradual clarification of the company's strategy, the batch price gradually returned to a rational range.

Potential risks include the promulgation of alcohol ban orders and unrealized economic recovery, etc.

Risk warning