According to a report released by gtja recently, with the domestic fiscal policy direction being positive, the market's expectations for the recovery and stabilization of domestic consumer demand are continuously increasing. The improvement in consumer demand logic is evident. In the short term, the baijiu industry is expected to take the lead, with the market focusing on the resilience and space for individual stock performance repair. The impact of performance fluctuations on stock prices has been blunted, and demand for mid to high-end baijiu products shows the most repair resilience. Small and medium market cap symbols such as shede spirits (600702.SH), sichuan swellfun (600779.SH), jiugui liquor (000799.SZ), and other symbols may show relative returns.

GTJA's main opinions include:

The continuous warming of domestic demand improvement highlights the elasticity of the baijiu market. With the recent positive direction of domestic fiscal policy and the results of major overseas events coming to fruition, the market's expectations for the recovery of domestic consumer demand and the stabilization of the real estate industry chain continue to rise. The improvement in consumer demand logic is evident. Baijiu, as a high-end consumption and typical pro-cyclical industry, has significant demand recovery resilience. Although the baijiu industry in Q3 2024 is still in a performance adjustment phase due to inventory cycle effects, after the sector's positions have fallen, the micro trading structure is further optimized. Currently, the Shenzhen Stock Exchange Baijiu Index valuation is around the historical 20th percentile, and it is expected that subsequent strong recovery expectations will support the sector's valuation, with stock price inflection points potentially leading fundamental inflection points (similar to 2014, where the sector's stock prices bottomed in Q1 2014 and performance growth turned positive in Q4 2014).

Industry in the peak season stabilizes order, with priority in 2025 market share. From October 2024 to now, the industry has mainly focused on stabilizing prices, digesting inventory, and overall control measures. Leading baijiu brands Maotai and Wuliangye have recently initiated phased suspensions and market controls to counter the impact of external factors such as Singles' Day sales, actively maintaining pricing systems. It is expected that leading companies will start to move inventory after a red start at the end of 2024 and pay attention to the progress of inventory clearance and batch price operations. Looking ahead to 2025, although the industry is expected to be in an adjustment phase for several quarters, leading companies generally plan for growth, with Maotai as the core, setting growth plans for the whole year. From a growth logic perspective, market share logic will replace price logic. It is expected that leading liquor companies will continue to adjust product structures and pricing systems to adapt to external demand environments. The Spring Festival in 2025 will be the best observation point, and companies with strong brands and channels are expected to increase market share.

Short-term preference for resilience, medium-term focus on performance. 1) In the short term, resilience-oriented symbols are preferred: The bank believes that in the short term, the focus is on the resilience and space for individual stock performance repair. The impact of performance fluctuations on stock prices has been blunted, and mid to high-end baijiu consumption demand shows the most resilience for recovery. Especially small market cap symbols with clear trading structures such as shede spirits (600702.SH), sichuan swellfun (600779.SH), and jiugui liquor (000799.SZ) may show relative returns; 2) In the medium term, focus on performance, emphasizing market share logic. The bank believes that the sector will still need to seek performance support in the future. The baijiu industry continues to destock, and leading companies with strong brands and channels in various price segments are expected to lead the way out of adjustment or achieve share increase against the trend. Expected performance certainty for symbols such as Kweichow Moutai (600519.SH), Wuliangye (000858.SZ), Shanxi Xinghuacun Fen Wine Factory (600809.SH), Luzhou Laojiao (000568.SZ), Jiangsu King's Luck Brewery Joint-Stock (603369.SH).

Risk warning: Significant price fluctuations, food safety issues, and industrial policy adjustments, etc.