According to the Zhitong Finance APP, Guotai Junan released a research report stating that after the adjustment phase of the liquor sector from 2021 to 2024, the valuation bubble has been sufficiently reduced, and fund holdings are at a cyclical low, with stock price turning points possibly occurring earlier than the fundamentals; based on this, it is important to grasp the changes in the commodity attributes of liquor, highlighting the advantages of leading liquor companies, and selecting stocks around the market share theme: 1) enterprises with large brands and large production capacities, such as leading companies in strong-flavor, sauce-flavor, and light-flavor categories; 2) regional leaders with appropriate price positioning and strong channels and high regional market share.

Guotai Junan's main viewpoints are as follows:

Demand side awaiting stabilization, inventory cycle continuing, and the second half of the year may be the performance bottom.

Since March 2025, the industry prosperity has been observed to still be in the bottom range, mainly due to the fading of seasonal effects and the marginal strengthening of restrictions on government and official consumption; considering factors such as the intensification of global trade conflicts, it is expected that in Q2 2025, the industry will still show significant destocking and squeezing characteristics, with the current industry at the profit bottom for channels, but the inventory bottom and performance bottom are expected to be reached in the second half of 2025. From an operational perspective, in the first half of 2025, companies like Gu Jing, King’s Luck, SHANXI FEN WINE, Moutai, and YINGJIA DISTILLERY, which have market share logic, still show relatively leading sales performance.

Reshaping of liquor commodity attributes, strengthening of fast-moving consumer goods attributes, and prioritizing market share logic.

The economy is currently in a recovery phase, but the intensification of global trade conflicts may prolong the slope of economic recovery. Considering the current industrial structure, residents' income levels, and the performance of major asset prices such as housing, the firm believes that: 1) the commodity attributes of liquor are being reshaped, and the fast-moving consumer goods attributes will continue to strengthen; 2) the growth logic of enterprises is shifting from price logic to market share logic, with the key to enterprise growth being whether they can capture the largest base of consumer groups and convert volume advantages into price advantages; 3) based on this, the marketing focus of liquor companies is shifting from the B-end to the C-end, and companies need to have the capability to explore channels for mass consumption and brand storytelling.

The differences in individual stocks based on market share logic stem from channels and brands.

The commonality of enterprises with market share logic is: 1) one or more products are in the first half of their life cycle; 2) lower-tier products can leverage the influence of high-tier core products; 3) scale effects are prominent, and mature markets continue to show an increase in market share. The differences in market share logic are that brands like Fenjiu are still in the brand-driven stage, and the channel system still has significant room for improvement, while channel push plays a more important role in regional liquor.

Risk Warning: Food safety, industrial policy adjustments, etc