The Zhitong Finance App learned that Zheshang Securities released a research report saying that the profit forecast for 2023Q2 liquor is forecast: the revenue growth center of major wine companies is about 20%, the profit growth rate of some wine companies under cost control and a low base exceeds the revenue growth rate, and it is expected that the performance of the sector will be elastic throughout the year under the catalyst of potential policies. 23H2 will focus on three main investment lines: 1) first focusing on quarterly reports exceeding expectations or event catalysis; 2) second focusing on the main line of certainty; 3) also focusing on the main line of recovery elasticity. Currently, the sector is at the bottom of expectations, valuations are within a strong cost ratio range, and there are potential catalysts in the external environment, channel and terminal safety pads still exist in the liquor storage cycle in the internal environment, high-end & popular & 300-400 yuan price band sales are still recovering. Therefore, the bank is still cautiously optimistic about the second half of the year and is optimistic about the elasticity of the 23H2 sector.

The main views of Zheshang Securities are as follows:

Which wine companies performed better than expected in 23Q2?

The overall repayment progress of the 23Q2 liquor industry is excellent, inventories are at a normal level, and batch prices are generally stable. By price, high-end liquors are stable, regional wines are superior, and sub-high-end liquors are under pressure.

Looking at the repayment progress: The overall repayment progress performance was excellent. The Dragon Boat Festival repayment progress for high-end liquor and regional liquor both performed excellently, and the Dragon Boat Festival repayment progress of sub-high-end wine companies was relatively under pressure.

In terms of inventory: High-end wine/regional wine stocks are generally still in a normal state (early deliveries are made one after another, short-term delivery has little impact on inventory levels), while sub-high-end alcohol stocks are on an upward trend in the short term. The reason for the current high inventories of some wine companies is that wine companies have certain requirements for growth rate (continuous delivery). In reality, the industrial side is still in the upward expansion stage, and it is expected that it will gradually decline as sales are digested in the future.

Looking at the batch price: 1) Short-term: Affected by external factors, all major wine companies used “price stabilization and increase” measures to anchor their performance in '23, and the wholesale prices of some wine companies fluctuated slightly around the end of the day. 2) Mid-term: Since mass consumption upgrades continue, the medium-term trend of rising liquor price bands has not changed. Combined with the expansion of soy wine volume, the lower end is still the mainstream price band for medium term expansion.

Based on the above, the bank updated the profit forecast forecast for wine companies in 2023Q2:

Overall, the revenue growth center of major wine companies is around 20%. The profit growth rate of the lower portion of wine companies under cost control & low base exceeds the revenue growth rate. It is expected that the performance of the sector will be elastic throughout the year under potential policy catalysts.

Looking at individual stocks: High-end liquor performance is steady, sub-high-end liquor differentiation (alcoholic wine, Shuijing Fang is under slight pressure), and regional liquors generally perform well. Among them, Yingjia Gongjiu/Shunxin Agriculture/Yanghe Co., Ltd., Jinhui Liquor/Gujing Gongjiu 23Q2 quarterly report may exceed expectations.

In the present moment, how should you make recommendations?

Question 1: What are the reasons and differences in the liquor sector adjustment in '23 vs. October '22?

① External reasons: Unstable future macroeconomic expectations, concerns about liquor associated with a strong economy, or facing: unstable terminal demand & a slowdown in later performance growth;

② Internal reasons: high inventory & declining batch prices & capacity expansion, combined with 23 years of high targets, the market is worried about liquor

The industry may be at an inflection point.

Currently, the liquor sector is at the bottom of expectations, valuations are in a strong cost ratio range, and there are potential catalysts in the external environment, channel and terminal safety pads still exist in the internal environment, high-end & popular & 300-400 yuan price band sales are still recovering. Therefore, the bank is still cautiously optimistic about the second half of the year and is optimistic about the elasticity of the 23H2 sector.

Question 2: How to judge the characteristics of the liquor industry in '23?

① Volume: The recovery and growth of volume is still determined. Short-term volume growth is the core driving force, and product layouts benefit from diversified product layouts. At the same time, wine companies are growing at a price range they are good at. At the same time, they are firm in their core products and actively lay out medium- to long-term development;

The trend of increasing the quality of alcohol continues, and the average number of dealers in leading wine companies continues to rise.

② Price: The short-term price upgrade momentum worsens, but the medium-term trend does not change. Main reasons: 1) High-end alcohol: the share of high-end alcohol is expected to increase in 22-25, leading to an increase in overall tonnage prices; 2) Second high-end: the current external environment is in a recovery channel, the level of banquet consumption scenarios is still improving (currently the proportion of banquets at lower high-end prices is increasing), and the price band of soy wine continues to widen, all of which help the sub-high-end still expand the fastest price band in the next two years.

Question 3: What is the 23H2 differentiated liquor investment strategy under the strong price-performance ratio range?

In the current context where the industry is at the bottom of valuations and expectations, liquor is a sector with strong economic relevance, the bank expects the sector's elastic performance under potential policy catalysis. 23H2 will focus on the three main investment lines:

1) First, focus on the quarterly report exceeding expectations or the main event catalytic line, such as Yingjiagong Liquor (603198.SH), Shunxin Agriculture (000860.SZ), Yanghe Co., Ltd. (002304.SZ), Jinhui Liquor (603919.SH), Gujing Gongjiu (000596.SZ), etc.;

2) Second, focus on the main line of certainty: optimistic about the resilient performance of high-end alcohol demand. Currently, the first estimate is for high-end liquors with cost effectiveness and definitive performance, such as: Kweichow Moutai (600519.SH), Luzhou Laojiao (000568.SZ), Wuliangye (000858.SZ), etc.;

3) Also, focus on the main line of recovery elasticity: We are optimistic about sub-high-end liquors with greater elasticity on the demand and performance side as consumption accelerates recovery, such as Shede Liquor (600702.SH), Shanxi Fenjiu (600809.SH), Shuijing Fen (), etc. 600779.SH

Risk warning:Risks that economic performance falls short of expectations; risk of declining wholesale prices for high-end alcohol; risk of food safety, etc.