According to the Futu Securities APP, Tianfeng Securities released research reports stating that under weak demand, liquor companies are proactively reducing pressure, and the growth rate of performance has slowed significantly. In Q3, the profit growth rate of liquor companies is still higher than the revenue growth rate, showing a continued trend of structural upgrade, but the overall performance growth rate has slowed significantly year-on-year/quarter-on-quarter. The bank believes that in the short term, attention can be given to the baijiu sector's band opportunities, while focusing on liquor companies with good fundamentals, cash flow, and valuation cost-effectiveness for medium to long-term opportunities. It still recommends focusing on: ① Liquor companies with core single products priced between 100-300 yuan and good performance: Shanxi Xinghuacun Fen Wine Factory (600809.SH) / Jiangsu King's Luck Brewery Joint-Stock (603369.SH) / Anhui Gujing Distillery (000596.SZ) etc.; ② High-end liquors with demand resilience: Luzhou Laojiao (000568.SZ) / Wuliangye Yibin (000858.SZ) / Kweichow Moutai (600519.SH); ③ Beta symbols: Shede Spirits (600702.SH) / Jiugui Liquor (000799.SZ) / Sichuan Swellfun (600779.SH) etc.

Tianfeng Securities' main points are as follows:

Reviewing Market Performance

This week (October 28th to November 1st), the food & beverage sector / baijiu sector / CSI 300 index had fluctuations of -0.39% / -1.00% / -1.68%. Specifically for the baijiu sector this week, Sichuan Swellfun had the highest increase of +9.10%, Shanxi Xinghuacun Fen Wine Factory +7.06%, and Shede Spirits +0.94%, while Jiangsu Yanghe Brewery Joint-Stock -6.74%, Anhui Kouzi Distillery -7.38%, and Anhui Yingjia Distillery -7.84% had the lowest fluctuations.

Weekly Outlook Update

Baijiu: Under weak demand, liquor companies are proactively reducing pressure, and the growth rate of performance has slowed significantly. Revenue / net profit attributable to the parent company: In Q3 24, revenue / net profit were 95.555 / 35.986 billion yuan (up 1.03% / 2.17% year-on-year), with revenue growth rates year-on-year/quarter-on-quarter at -14.30 / -10.14 percentage points, and net profit growth rates year-on-year/quarter-on-quarter at -15.58 / -9.88 percentage points. The profit growth rate is still higher than the revenue growth rate, indicating a continued trend of structural upgrade, but the overall performance growth rate has slowed significantly year-on-year / quarter-on-quarter. Gross margin / net margin: Q3 gross margin / net margin has positive changes year-on-year / quarter-on-quarter. In Q3 24, the baijiu sector's gross margin changed year-on-year / quarter-on-quarter by +1.05 / +0.25 percentage points to 81.40%; net margin changed year-on-year / quarter-on-quarter by +0.52 / +0.93 percentage points to 38.70%. Due to the increase in sector sales expense ratio year-on-year, the net margin increase is relatively weak.

Expense ratio: In Q3, many liquor companies increased expenses, leading to a year-on-year increase in expense ratio. In 24Q3, the sales expense ratio of the baijiu sector changed by +0.19/-0.80pct year-on-year/quarter-on-quarter to 11.14%, while the management expense ratio changed by +0.01/+0.08pct year-on-year/quarter-on-quarter to 5.24%. The sales expense ratio slightly increased year-on-year/decreased quarter-on-quarter, with more liquor companies significantly increasing expenses in 24Q3. Operating cash flow: Liquor companies do not force payment collection, leading to short-term pressure on cash flow. In 24Q3, the operating cash flow/sales cash collection comparison for the baijiu sector changed by -17.22%/+0.92% year-on-year, putting slight pressure on the sector's operating cash flow. Contract liabilities: Differentiated receivables intensify overall decline, but still emphasize resilience. At the end of 24Q3, the baijiu industry's contract liabilities changed by -6.10%/-1.32% year-on-year/quarter-on-quarter, with only 5 out of 18 listed liquor companies experiencing a year-on-year increase in contract liabilities (including prepayments), while the rest decreased.

Beer: At the end of the third quarter report, the pressure on volume and price continued, with increased expenses dragging down profits. The bank believes that under the future cyclical logic, if there is a turnaround in demand for dining and nightlife, it is expected to drive beer sales volume and upgrade speed, with the weather turning cooler in Q4, entering the off-season. The focus is on the progress of subsequent policy implementation and sales distribution waiting for next year.

Core product batch price

This week, the batch prices of 24-year-old Moutai (original/scattered) were 2230/2180 yuan, a change of -30/-45 yuan from last week; Puwu (eighth generation) batch price was 950 yuan, a change of -10 yuan from last week; Guojiao 1573 batch price was 860 yuan, unchanged from last week.

Sector investment recommendations

Short-term focus on the baijiu sector for short-term opportunities, while also paying attention to liquor companies with good fundamentals, cash flow, and valuation cost-effectiveness for medium- to long-term opportunities. It is still recommended to pay attention to: ① Liquor companies with core products priced between 100-300 yuan and good performance: Shanxi Xinghuacun Fen Wine Factory / Jiangsu King's Luck Brewery Joint-stock / Anhui Gujing Distillery / Anhui Yingjia Distillery, etc.; ② High-end liquors with demand resilience: Luzhou Laojiao / Wuliangye Yibin / Kweichow Moutai; ③ Beta symbols: Shede Spirits / Jiugui Liquor / Sichuan Swellfun, etc.

Risk warning: Oversupply; food safety risks; weak demand; intensified competition from homogenized products in the market.