Guotai Junan Securities: Liquor is approaching peak sales, focus on structural prosperity allocation

According to the Zhitong Finance APP, Guojin Securities released a research report stating that the demand for banquets has been released in July and August, and recently there is a window period for business hospitality and gift-giving demand ahead of the Mid-Autumn Festival and National Day. As the Mid-Autumn Festival and National Day approach, there will be a demand for gatherings with family and friends during the holidays. Compared to general public demand, gift-giving and hospitality demand is relatively more affected by industry policies and industry prosperity, ultimately leading to a relatively pressured sales experience at this point. However, observing the prolonged cycle, the trend of continuous recovery on a month-on-month basis is expected to be good. Considering that the bottom of the sales cycle is gradually being explored, the apparent performance pressure is accelerating its release, overseas interest rate cut expectations are rising, and the feedback from peak season sales is continuously improving month-on-month, along with the current top-down policy window period, the allocation value of the liquor sector is optimistic.

The main viewpoints of Guojin Securities are as follows:

Liquor: As the Mid-Autumn Festival and National Day peak season approaches, this week Guojin Securities continues to conduct research on core liquor companies and key regions. Overall feedback is basically in line with previous expectations, that is, the impact of external risk events on liquor consumption scenarios has been continuously easing month-on-month, but due to overall consumption scenario constraints, there is still a gap in consumption sentiment on the enterprise and resident sides compared to the same period last year, therefore the current window for liquor sales is still experiencing a year-on-year decline. It is expected that the decline will be about 20%, which is a larger drop compared to the Spring Festival peak sales window, but significantly narrower than the decline in June and July. It is expected that the consumption scenario will continue to recover, and with the ongoing "anti-involution" and the continuous implementation of consumption promotion policies in various places, it is expected that in the medium term, consumption sentiment on the enterprise and resident sides will continue to improve, and the prosperity of the liquor industry is expected to stabilize and rebound.

Recent feedback from channels indicates that the slope of recovery has been easing, which is related to the differences in consumption demand structure at various periods. The demand for banquets has been released in July and August, and recently there is a window period for business hospitality and gift-giving demand ahead of the Mid-Autumn Festival and National Day, waiting for the approach of these festivals and the demand for gatherings with family and friends during the holidays. Compared to general public demand, gift-giving and hospitality demand is relatively more affected by industry policies and industry prosperity, ultimately leading to a relatively pressured sales experience at this point. However, observing the prolonged cycle, the trend of continuous recovery on a month-on-month basis is expected to be good.

It is recommended to pay attention to the left-side allocation opportunities in the liquor sector. Although the overall valuation of the liquor sector has recovered from the bottom in late June, it is mainly benefited from liquidity improvement rather than a recovery in the allocation based on fundamental improvement. Considering that the bottom of the sales cycle is gradually being explored, the apparent performance pressure is accelerating its release, overseas interest rate cut expectations are rising, and the feedback from peak season sales is continuously improving month-on-month, along with the current top-down policy window period, the allocation value of the liquor sector is optimistic.

Allocation direction suggestions: 1) High-end liquor with prominent brand power and deep moats (Moutai (600519.SH), WLY (000858.SZ)), Shanxi Fenjiu (600809.SH) which is still in an upward channel momentum, and stable regional leaders benefiting from the resilience of public demand and the upgrading trend of rural consumption. 2) Cyclical potential catalysts with elastic targets (such as the nationally recognized liquor Gujing Gongjiu (000596.SZ), LZLJ (000568.SZ)), and elastic liquor companies catalyzed by new products, new channels, and new paradigms (such as Zhenjiu Lidu (06979), Shede Spirits (600702.SH)) Jiugui Liquor (000799.SZ) etc.

Beer: The demand scenario for beer is relatively popular, and the current demand for on-site consumption in restaurants is still steadily recovering. Beer companies are also increasing their layout in non-immediate consumption channels and developing soft drinks for diversified growth. Considering the good performance confidence and dividend levels of beer companies, it is recommended to continue paying attention.

Yellow Wine: The industry had price increase catalysts earlier, and the convergence of price increases among leading brands also means that the pulling power of liquor companies is expected to form a synergy, leading to a slowdown in the competitive landscape. Currently, it is gradually approaching the peak season, and marginal catalysts can still be expected; mid-term changes in industry trends and the cultivation of new products for younger consumers are worth noting.

Snacks: The snack wholesale channel accelerated its store opening speed in September, and single-store revenue maintained a month-on-month recovery trend. The subsequent transformation into a full-category supermarket combined with an increase in net profit margin is worth looking forward to. The supply side of the konjac category is becoming increasingly rich, with market penetration continuously improving, and leading companies' konjac single product monthly sales are still climbing. As the Mid-Autumn Festival and National Day approach, products like nut gift boxes are entering the stocking phase, and demand is expected to improve month-on-month. Recommended are Wancheng Group (300972.SZ), Yanjinpuzi (002847.SZ), and Weilong Delicious (09985), and it is suggested to pay attention to the new channel cooperation rhythm of Jingzai Food (003000.SZ).

Soft Drinks: The peak season is gradually coming to an end, and leading companies in high-growth sub-sectors (energy drinks, sugar-free tea, coconut water, etc.) maintain a high growth trend. With the support of health-oriented and functional categories, the industry's prosperity is turning upward. Some traditional categories (sugar tea, juice, milk tea, etc.) were slightly pressured by flash purchase subsidies earlier, but health, functionality, and large packaging categories performed well, and leading stocks have strong alpha. We remain optimistic about leading companies in high-growth sub-sectors, and with their channel management advantages and potential for category expansion, they are expected to maintain high growth in performance. Recommended are Dongpeng Beverage (605499.SH) and Nongfu Spring (09633), and it is suggested to pay attention to Bairun Co., Ltd. (002568.SZ).

Condiments: Restaurant demand remains subdued, and the pace of structural upgrades on the consumer side is slowing, stabilizing at the bottom of the prosperity cycle. Recently, the state issued "Several Policy Measures to Expand Service Consumption." Considering that the current valuation of the restaurant chain is at a low level and demand is expected to improve, the attention on the sector is increasing. From a fundamental perspective, the recovery of the restaurant chain has a certain lag, and we are currently optimistic about relatively stable demand and strong competitive advantages that can support performance growth, while also having potential for profit margin improvement and valuation elasticity. Recommended are Angel Yeast, which is increasing its overseas market share and benefiting from declining molasses costs, and Yihai International (01579), which has highlights in improving seasonal demand and dividend yield.

Risk Warning: Macroeconomic recovery may be less than expected, regional market competition risks, food safety issue risks