Introduction to this report:
This round of Flying Sky's price fluctuations is a short-term behavior of some channels against the backdrop of weak demand. According to our estimates, there is relatively limited room for price decline. After the risk is cleared, it is expected that it will gradually stabilize, and Maotai's price and stock price are expected to enter a new balance.
Key points of investment:
Investment advice: Maintain an increase in holdings rating. Demand for liquor has been weak since the second quarter. Flurry's batch price fluctuations are mainly due to short-term behavior of some channels. It is expected to gradually stabilize after the risk is cleared. Maotai's wholesale price and stock price are expected to enter a new balance, maintaining EPS of 69.58 yuan, 81.36 yuan, and 94.51 yuan in 2024-26, and maintaining the target price of 2286.53 yuan.
Maotai's pricing has become an important observation indicator for the current liquor industry. Overall, Maotai's price changes are driven by a combination of supply and demand structures and financial attributes. Its price is an important signal and has a supporting effect on stock prices and valuations. We suggest in our two liquor industry update reports, “Two Transformations in the Liquor Industry” released on April 7, 2024, and “Towards a New Balance” released on April 11, that liquor currently shows the characteristics of a combination of low reality and low expectations. Industry expectations, in particular, Maotai's pricing, will be more in line with the economy and have once again reached a steady state, which is an important observation indicator for the industry.
Historical price review: The relationship between supply and demand is the core, and financial attributes are interpreted. Reviewing the price of Flying Moutai in the past 15 years can be roughly divided into 5 stages with two ups and three falls, including: Together (2008-2011:
Driven by infrastructure, double increase in drinking/investment demand), Ichibai (2012-2016: in-depth industry adjustments, falling close to factory price due to shrinking+inventory pressure), and two cases (2016-2021:
The real estate boom creates a wealth effect, and the attributes of Flying Finance are prominent), two falls (2021-2022:
Asset prices peaked, demand fell), tripped (since March 2024: weak recovery in demand).
Overall, Maotai's upward price increases are mostly the result of multiple factors resonating with supply and demand, and the interpretation of financial attributes will strengthen the price cycle; most of the price decline is a demand factor, and manufacturers usually take measures to respond positively.
Price fluctuations release risk and are expected to move towards phased equilibrium. The overall consumption growth rate slowed in April-May. At the same time, liquor sales were low, and sales in the liquor industry were lackluster during Dragon Boat Festival. We believe Maotai prices will gradually stabilize after this round of panic is released. We calculated it using three methods. It is estimated that the batch price of the scattered bottle Flying Sky will reach a phased bottom in the 2000-2200 yuan range. The downward space corresponding to the current batch price is relatively limited. The calculation results are for reference only.
Risk warning: sharp price correction, slower than expected recovery in demand, large outflows of foreign capital, etc.