Cathay Securities and Haitong Securities: The fundamentals in Q3 2025 are accelerating towards the bottom, and the liquor sector has entered a strategic allocation period

According to the Zhitong Finance APP, Guotai Junan has released a research report stating that although improvements in the fundamentals still require patience, the performance of major liquor listed companies in the third quarter shows a significant year-on-year decline in revenue, with financial statements accelerating their clearing. Meanwhile, the prices of high-end liquor have continued to decline recently, and the market is accelerating its search for a balance between volume and price. The changes in the capital market have shifted from an uncertain bottoming out in the past to a predictable bottoming out in the foreseeable future. For medium to long-term funds, it is now possible to conduct long-term pricing for high-quality enterprises. Therefore, for high-quality companies, it has entered a strategic allocation period.

The main points of Guotai Junan are as follows:

Fundamental Analysis: Accelerated Downward Trend in 25Q3 Fundamentals, Accelerated Clearing of Financial Statements

In the first three quarters of 2025, the liquor industry achieved operating revenue of 310.28 billion yuan, a year-on-year decrease of 5.48%, and a net profit of 122.69 billion yuan, a year-on-year decrease of 6.63%. In terms of revenue and profit growth rates, national famous liquor > real estate liquor > sub-high-end. In 25Q3, the liquor industry achieved operating revenue of 76.31 billion yuan, a year-on-year decrease of 18.4%, and a net profit of 28.21 billion yuan, a year-on-year decrease of 22.0%. In terms of revenue growth rates, national famous liquor > real estate liquor > sub-high-end liquor, and in terms of profit growth rates, national famous liquor > sub-high-end liquor > real estate liquor.

In the first three quarters of 2025, the liquor industry had a net profit margin of 40.6%, a year-on-year decline of 0.5 percentage points, with the main reasons for the decline being increased tax rates and decreased gross profit margins. In 25Q3, the liquor industry had a net profit margin of 38.0%, a year-on-year decline of 1.7 percentage points, mainly due to decreased gross profit margins, increased operating tax rates, and increased management expense ratios.

At the end of 25Q3, the liquor industry had pre-receivable accounts of 42.97 billion yuan, an increase of 2.04 billion yuan from the end of 25Q2, and a year-on-year decrease of 1.5 billion yuan. In terms of the year-on-year change in pre-receivables, national famous liquor performed relatively well.

In 25Q3, the net cash flow from operating activities in the liquor industry was 21.39 billion yuan, a year-on-year decrease of 54.2%, with cash received from sales of goods and services amounting to 81.90 billion yuan, a year-on-year decrease of 26.9%, indicating that the decline in cash flow was greater than the decline in revenue.

In the first three quarters of 2025, the net cash flow from operating activities in the liquor industry was 110.32 billion yuan, a year-on-year decrease of 4.9%, with cash received from sales of goods and services amounting to 335.38 billion yuan, a year-on-year decrease of 3.5%, indicating that the decline was less than the decline in revenue.

Valuation Analysis: Valuation Below Historical Mean, Leading Brands Have Safety Margins

As of October 31, 2025, the absolute PE level of the liquor sector was 18.7x, lower than the average level of 27.6x from 2011 to the present. The relative PE multiple of the liquor sector (relative to the Shanghai Composite Index) was 1.14x, lower than the average level of 2.01x from 2011 to the present.

Guotai Junan believes that the current valuations of the sector and leading companies have partially reflected the market's expectations of pressure on mid-term demand. In the medium to long term, if demand improves, the financial statements will also improve, and the industry is expected to return to a stage of dual impact from valuation and performance. In terms of dividends, the dividend payout ratio of liquor companies is expected to continue to increase in the future, and leading companies have disclosed three-year dividend return plans. Most liquor companies currently have a dividend yield of over 3%, which has medium to long-term investment value, and the valuations of leading brands have safety margins Target Aspects

Key recommendations: Luzhou Laojiao (000568.SZ), Shanxi Fenjiu (600809.SH), Moutai (600519.SH), WLY (000858.SZ), pay attention to Yingjia Gongjiu (603198.SH), Jinhui Jiu (603919.SH), Gujing Gongjiu (000596.SZ), Jinshiyuan (603369.SH), Yanghe (002304.SZ), etc.

Risk Warning

Economic downturn affects overall demand for liquor; food safety issues