According to the Wisdom Financial APP, Zheshang Securities released research reports stating that liquor companies in the third quarter of 2024 took the initiative to control speed, striving to resolve the supply and demand contradictions and inventory pressure in their development. The revenues/profits of Kweichow Moutai, Anhui Gujing Distillery, Shanxi Xinghuacun Fen Wine Factory, Sichuan Swellfun, Hebei Hengshui Laobaigan Liquor, etc. are in line with expectations. In the third quarter of 2024, the baijiu industry's revenue increased by 1.27% year-on-year to 96.382 billion yuan, and net income attributable to shareholders increased by 2.21% year-on-year to 35.986 billion yuan; excluding Kweichow Moutai, the baijiu industry's revenue decreased by 6.80% year-on-year in the third quarter of 2024, and net income attributable to shareholders decreased by 7.96% year-on-year. Against the background of the performance differentiation already reflected in the third-quarter reports, the subsequent focus will be on investing in leading symbols with strong brand momentum, earlier inventory clearance, and reasonable growth targets. The investment opportunity may be verified by the Spring Festival of 2025.

Zheshang Securities' main points of view are as follows:

On the revenue and profit side: The differentiation is intensifying, and overall performance in the third quarter is showing a slowing trend.

In terms of growth rate, there are still 10 liquor companies with revenue growth and 11 liquor companies with profit growth in the third quarter of 2024. Among them, high-end liquor, mid-range, and regional leading liquor revenue changes are +9.6%, -0.4%, -17.0% respectively, and profit changes are +9.2%, -2.0%, -32.3% respectively. In the third quarter of 2024, high-end liquor showed resilience, while mid-range and regional leading liquors significantly differentiated. Due to the stronger-than-expected performance of the baijiu sector in the first quarter of 2024, high-end liquor, mid-range, and regional leading liquors still achieved revenue and profit growth in the first three quarters of 2024, with profits increasing for 12 liquor companies in the first three quarters of 2024.

Compared to expectations, the revenues/profits of Kweichow Moutai, Anhui Gujing Distillery, Shanxi Xinghuacun Fen Wine Factory, Sichuan Swellfun, Hebei Hengshui Laobaigan Liquor, etc. are in line with expectations in the third quarter of 2024. Some liquor companies performed below expectations due to weak sales during the Mid-Autumn Festival and National Day, prompting liquor companies in the third quarter of 2024 to take the initiative to control speed and stay on course.

On the profitability side: The overall net margin is under pressure, with only 6 liquor companies showing an increase in gross margin and 8 in net margin in the third quarter of 2024. Additionally, 13 liquor companies experienced an increase in operating expense ratio, and 11 liquor companies saw an increase in sales expense ratio.

Report quality end: Q3 prepayments and cash flow under pressure, only a few liquor companies such as Wuliangye, Fen Wine perform relatively well.

Prepayments: Only Wuliangye, Xinjiang Yilite, Jinhui Liquor, Shanxi Fen Wine, Anhui Golden Seed Winery showed positive year-on-year growth in prepayments in 24Q1-3. Among them, the high-end liquor prepayments increased by 6.1% year-on-year, the mid-range prepayments increased by 0.1% year-on-year, and the regional liquor prepayments decreased by 24.7% year-on-year.

Cash flow: In 24Q3, only Jinhui Liquor, Shanxi Fen Wine, Wuliangye, Anhui Gujing Distillery, Luzhou Laojiao showed positive year-on-year growth in cash flow. In 24Q3, the high-end liquor cash flow decreased by 16.6% year-on-year, the mid-range cash flow increased by 26.6% year-on-year, and the regional liquor cash flow decreased by 35.4% year-on-year.

Dividend end: Wuliangye announced a three-year dividend plan and liquor companies focus on shareholder returns.

This time, Wuliangye released the 2024-2026 shareholder return plan, committing that the total annual cash dividend amount from 2024 to 2026 will account for no less than 70% of the net income attributable to the parent company for that year, and not less than 20 billion yuan (tax included). Previously, Moutai and Yanghe promised a three-year dividend plan for 24-26 in the interim report season. Moutai promised a dividend rate of not less than 75% for 24-26, while Yanghe promised a dividend rate not less than 70% for 24-26 and a dividend amount not less than 7 billion, highlighting liquor companies' focus on shareholder returns and boosting market confidence.

Four focus points: There are significant differences in the Q3 report quality, and leading liquor companies still show resilience.

Slowing growth: Liquor enterprises represented by Wuliangye (000858.SZ), Fen Wine (600809.SH), Gujing (000596.SZ), Jiangsu King's Luck (603369.SH), Yingjia (603198.SH), Sichuan Swellfun (600779.SH), Hebei Hengshui Laobaigan (600559.SH) actively control the pace and target steady growth. Prepayments: Different channel collection willingness and cash receipt differentiation. Shanxi Fen Wine, Guizhou Moutai (600519.SH), Gujing Distillery, Jinhui Liquor have relatively leading collection and cash receipt capabilities, and it is expected that steady growth can still be maintained in Q4. Number of dealers: Jiangsu King's Luck, Hebei Hengshui Laobaigan, Jinhui Liquor, Anhui Kouzi Distillery (603589.SH) have continued to increase the number of dealers on a month-on-month basis, providing support at the channel end. Product structure: Upgraded structure slows down growth, with the 100-400 yuan price range performing the best.