Huachuang Securities released a research report recommending investors capitalize on the pre-holiday recovery in the liquor sector. Short-term factors include the November-December decline in wholesale prices and stock prices, exacerbated by dealer pessimism due to this year’s supply-demand imbalance and concerns over next year’s trajectory. However, sentiment is expected to rebound following proactive measures by leading brands like Kweichow Moutai and Wuliangye, with resilient sales anticipated despite the delayed Lunar New Year. Medium-to-long-term, the next six months remain a critical window for absolute-return funds to position in the liquor cycle. Currently, Huachuang advises prioritizing Kweichow Moutai (600519.SH), citing its proactive adjustments and lower earnings risk. Key insights follow:
**Kweichow Moutai: Supply Control Restores Confidence, Wholesale Prices Rebound** Amid supply-demand mismatches and weakened channel confidence, Moutai Feitian’s wholesale price briefly fell to around ¥1,500. With prices now near guidance levels, provincial meetings were held to address concerns, leading to a ¥100 rebound to ~¥1,600. Measures include: 1. Halting unfulfilled 2025 quota allocations, prioritizing stability over a strong Q1, with controls lasting until mid-to-late January. 2. Potentially further reducing high-value product quotas (e.g., aged, premium, and 1L bottles) while boosting market-driven pricing. Subsidies for premium Moutai may restore dealer margins, aligning with the "non-indicator-focused" strategy. For 2025, balancing growth and price stability remains challenging, with likely moderated earnings growth. Strategies may involve limiting high-value products to lift prices, ensuring dealer profitability, and revitalizing distribution via new partnerships.
**Wuliangye: Subsidies Boost Turnover** 1. Spring Festival discounts lowered普五’s invoice price to ¥900 (first adjustment since 2014), reducing channel costs. 2. Four incentive programs (market expansion, promotions, opaque rewards, and scan-to-redeem) could offer ~¥100/bottle subsidies, supplemented by year-end rewards and bill support. 3. Digital management (e.g., scan-to-win) and tiered rebates for retailers aim to enhance turnover and terminal loyalty. Huachuang views Wuliangye’s bold pricing adjustments and channel support as necessary to reset market order.
**Outlook** 2025’s liquor sector recovery hinges on volume over price, with Moutai stabilizing price ceilings and Wuliangye accelerating inventory clearance. Post-Lunar New Year, price stabilization and inventory digestion will be pivotal for other brands to follow suit.
**Risks**: Slower-than-expected demand recovery, wholesale price declines, or prolonged consumption constraints.
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