The Zhitong Finance App learned that Huachuang Securities released a research report saying that the liquor sector has plummeted under pressure, causing market concerns. Since New Year's Day, the liquor sector has been falling for many consecutive days, with a cumulative decline of 5.2%. The decline reached 3.4% on Wednesday, causing market concerns. The bank believes that sector sentiment is already overly pessimistic. There is little chance that sales expectations will be low during the Spring Festival. The value of the sector is prominent, and the “Big Four” are preferred. Whether it's short-term tracking feedback or the restructuring of long-term liquor operation logic, the four big wine companies are still strong enough to drive steady growth, but the downward squeezing of famous wine will be even more obvious, and there will be sharp differentiation in terms of payments, inventory, etc. However, the market's expectations for a recovery in consumption are generally weak. Sector valuations are already extremely cost-effective. There are short-term opportunities for a sharp decline and rebound, and long-term value is prominent.

The main views of Huacheng Securities are as follows:

Cause: Triple pressure resonance, market expectations weaken.

Market sentiment is weakening this time. First, the average CPI for the fourth quarter is -0.3% year-on-year, the price performance is weak, the pressure on channel funding has increased, and the overall pessimistic mood under high channel pressure; second, election events are being carried out intensively in many parts of the world. Greater uncertainty has led to a decrease in risk appetite in the foreign capital market, and capital outflow to the north was obvious; third, the CPI average for the fourth quarter was weak, and the marginal consumption trend of 74% had not yet recovered to the same period in '19, triggering a market recovery for white wine Pessimistic expectations. Under triple pressure resonance, the sector plummeted under pressure.

Outlook: The mood is excessively pessimistic, and the value of the sector is prominent.

The bank believes that sector sentiment is already overly pessimistic. There is little chance that sales expectations will be low during the Spring Festival, and that the value of the sector is prominent. Specifically, first, the spring festival repayment pressure is extreme, and channel pessimism is serious, and the recovery situation should be judged more objectively in conjunction with the Spring Festival sales pace; second, the sector's current valuation and cost performance ratio is prominent. With the exception of Maotai/Fenjiu/Gujing, other liquors are 15 times more valued at 24 times. Even the corresponding 23-year valuation is basically lower than the value at the bottom of October '22. The valuation cost ratio is outstanding. Third, recently, wine companies have also been intensively carrying out marketing promotion activities, relaxing their authority to pay bills, etc., to relieve pressure on channels. There is still a high degree of certainty that they will get off to a good start. At the same time, on the capital market side, wine companies such as Fenjiu, Jinshiyuan, and Zhenjiu Lidu are also actively communicating with investors to answer market concerns and ease market pessimism. The specific feedback is as follows:

Fenjiu, Shanxi: Sales are booming, and potential is improving. The company's sales boom continues, the Spring Festival layout is orderly, the Chinese Qinghua mass consumption atmosphere has increased, turnover has increased, the revival self-purchase rate has increased, the Qinghua 20 local market is out of stock, dealers are applying for additional quotas, etc. Currently, mainstream price changes for core products are in a reasonable and manageable state, and the brand position and channel profit advantage are still maintained. It is expected to maintain 20% + growth throughout 24 and Q1. Moreover, the company is in a period of development opportunities, and its operating potential continues to improve.

Present world relationship: Strong potential and clear path. The company got off to a good start and the repayment process is about 20%. Currently, fees are relatively restrained to guarantee product prices, and channel profits are still higher than competitive products. Currently, the province's economic performance is excellent. Wine companies in the province are mainly competing, and there is still enough space. The company continues to focus on climbing to the top, and the layout outside the province has accelerated breakthroughs. The formulation of “three years of no profit, 3 billion in three years” is full of strength, with Guoyuan brand expansion first, a four-open+six-line layout, focusing on the “10+N” region to achieve key breakthroughs, and the path is clear.

Zhenjiu Li Du: Steady progress, but I still have enough confidence. Recently, the company has been working intensively to assist in sales, and Kickoff has progressed steadily. Currently, the repayment ratio is around 70%. The Zhen15 product turnover rate is high. After being introduced into the distribution channel, Zhen30 may contribute additional growth. Various divisions on the channel have been sorted out, and efficiency has been further improved. The regional base market provides steady growth support, and Guangdong and Hunan are also expected to continue to contribute to growth. Currently, the company operates pragmatic channels and is expected to exceed 8.4 billion yuan in revenue in 24 years.

Spring Festival schedule: Liquor companies speed up repayment, and sales gradually begin during peak season.

This week, wine companies sped up the repayment process. High-end wine Maotai/Wuliangye/Luzhou Laojiao repayment was 25%-30%/40%-50%/35%, as channels arrived one after another, and the bulk price dropped slightly; the sales promotion effect of “Fenjiu” was good, and the repayment was carried out in an orderly manner; Furui's repayment increased by about 5% month-on-month compared to last week. The rate of Gu8/Gu 5 increased, and the Gu 16/Gu 20 lot price rebounded slightly. Yanghe/Jinshiyuan is also proceeding with the repayment process in an orderly manner. Looking at terminal performance, the pre-holiday annual party and wedding party scene performed well. Some supermarkets and regional tobacco hotels have already been stacked up for Spring Festival liquor gifts one after another, warming up ahead of the peak season, and sales are expected to pick up further near the Spring Festival.

Investment advice: value layout, the “Big Four” are preferred.

Whether it's short-term tracking feedback or the restructuring of long-term liquor operation logic, the four big wine companies are still strong enough to drive steady growth, but the downward squeezing of famous wine will be even more obvious, and there will be sharp differentiation in terms of payments, inventory, etc. However, the market's expectations for a recovery in consumption are generally weak. Sector valuations are already extremely cost-effective. There are short-term opportunities for a sharp decline and rebound, and long-term value is prominent. On the specific target:

First, focus on deterministic core leaders Kweichow Moutai (600519.SH) (with sufficient operating license, stable performance as Taishan, outstanding medium- to long-term value) and Shanxi Fenjiu (600809.SH) (sales are expected to continue to grow rapidly in an inertial manner);

Second, calculate the bottom line value, find repairs to the overrun decline, and recommend Wuliangye (000858.SZ) (excellent sales, high value bottom line) and Luzhou Laojiao (000568.SZ) (business stability and report sustainability are still determined);

We continue to recommend regional leaders, Gujing Gongjiu (000596.SZ) and Jinshiyuan (603369.SH), which are relatively strong in the market and whose performance is still certain.

Risk warning: slow recovery in terminal demand, pressure on inventories and prices, increased competition, outflow of foreign capital, etc.