Today, the white liquor stocks fell again. As of publication, Jiangsu King's Luck Brewery Joint-Stock fell more than 2%, Anhui Gujing Distillery, Luzhou Laojiao, Anhui Yingjia Distillery, and Shanxi Xinghuacun Fen Wine Factory all fell more than 1%.

Among them, Kweichow Moutai fell nearly 2% today after losing the 1,400 yuan mark yesterday, reaching a new low since November 2022. The latest market value is 1,722.1 billion yuan, and the market value has evaporated more than 150 billion yuan in the past seven trading days.

Being downgraded by major banks, funds are withdrawing one after another.

It is noteworthy that UBS's research report holds a pessimistic attitude towards the future of the baijiu industry and has downgraded the ratings of many baijiu leaders such as Kweichow Moutai, Wuliangye, and Luzhou Laojiao from 'buy' to 'neutral'.

UBS believes that due to the potential digestion of Moutai's "social inventory", the expansion of the industry leaders' capacity, and the continuing macroeconomic unfavorable impact, the supply and demand of the entire baijiu industry will further deteriorate in the next 12 months.

The agency predicts that the average compound annual growth rate of earnings per share of baijiu companies covered from 2023 to 2025 will slow from 19% from 2020 to 2023 to 8%. As leading baijiu companies have not actively controlled supply and greatly expanded their production capacity, it is predicted that the retail price of ultra-high-end baijiu companies will face greater pressure in 2024 and 2025.

It is noteworthy that Northbound funds have continued to flow out of the baijiu sector recently. Last week, Northbound funds cumulatively net outflow 11.417 billion yuan, of which Kweichow Moutai was net sold out 2.08 billion yuan; from April 29th to July 26th this year, Kweichow Moutai has been net sold out by foreign funds over 10 billion yuan.

At the same time, domestic public funds are also starting to reduce their holdings of baijiu stocks. Well-known fund managers Jiao Wei, Li Xiaoxing, Zhu Shaoxing, and others all reduced their holdings of Kweichow Moutai in the second quarter.

The proportion of heavy holdings of baijiu stocks by public funds has declined from a historical high of 15.1% in the fourth quarter of 2020 to 9.9% in the second quarter of 2024, showing a continuous downward trend.

Leading liquor companies are expected to maintain steady performance.

From the A-share liquor companies that have released half-year performance forecasts or half-year reports recently, performance differentiation is quite obvious-steady performance of leading liquor companies, while most small market value liquor companies perform poorly.

ST Chuntian is expected to have a net profit attributable to shareholders of the listed company from January to June 2024 of -58 million yuan to -68 million yuan.
Yanshi Shares expects to achieve a net profit attributable to shareholders of the listed company from January to June 2024 of -55 million yuan to -82.5 million yuan.
Jinfeng Wine Industry is expected to achieve a net profit attributable to shareholders of the listed company from January to June 2024 between -15.1 million yuan and -18.4 million yuan.
Huangtai Wine-Marketing Industry is expected to have a net profit attributable to shareholders of the listed company from January to June 2024 of -3 million yuan to -5 million yuan.
Once the dark horse, Jiugui Liquor expects a net profit attributable to shareholders of the listed company in the first half of the year to be between 1.1 billion yuan and 1.3 billion yuan, a year-on-year decrease of 73.93% to 69.19%.

For the reasons for the decline in performance or losses, many liquor companies stated that the baijiu industry is still in a destocking cycle, with a clear trend of concentration of the industry towards superior production areas, enterprises, and brands. Small and medium-sized brand liquor companies are increasingly squeezed out, and companies are also affected by the industry environment.

Among the liquor companies that have released half-year performance forecasts or half-year reports recently, Swellfun's operating income in the first half of this year was 1.719 billion yuan, a year-on-year increase of 12.57%. Net profit reached 0.242 billion yuan, an increase of 19.55% year-on-year.
Jinzhongzi is expected to achieve net profit of 10 million yuan to 15 million yuan in the first half of 2024, turning losses into profits compared to the same period last year.

Currently, leading liquor companies such as Kweichow Moutai and Wuliangye have not yet released their business data for the first half of the year. However, judging from the market work conferences held by each company in the past few months, it may mean that the performance of leading liquor companies in the first half of the year is expected to remain robust.

Despite facing numerous challenges, the trend towards industry consolidation in the baijiu sector continues to accelerate. China International Capital Corporation (CICC) pointed out that baijiu companies with outstanding advantages in brand, organization and channel may reap market share, and the top 10-20 companies in the industry still have the opportunity to enjoy the benefits of consolidation. This means that although the baijiu sector may face adjustments in the short term, high-quality baijiu enterprises still have room for development in the long run.

GTJA Securities released a research report stating that the current downturn in the baijiu industry is different from the previous one, with relatively small adjustments in demand and expectations but a longer adjustment time. At the current point in time, the sector has undergone significant adjustments due to weak off-season demand and factors such as the pricing of high-end liquor. Currently, the denominator end risk appetite is low, with the overall value being determined before growth.

Galaxy Securities stated that both position risk and valuation risk in the baijiu sector have been released. Under the trend of weak industry prosperity and increased market concentration, coupled with lower market risk appetites, the market is more inclined to focus on post-trade performance rather than prospective performance of high-quality targets. Therefore, the outlook for such targets is not pessimistic.