The Zhitong Finance App learned that Haitong Securities released a research report saying that in 24Q3, in a weak demand environment, industry operations were under pressure, and downstream channel repayments became more cautious. Major wine companies began to actively adjust to relieve channel pressure, leading to a month-on-month decline in liquor revenue/payback/cash flow/profit, and a decline in part year-on-year, and repayment/cash flow was weaker than apparent revenue. The gross margin of the 24Q1-3/24Q3 beer sector (A share) was +1.67pct/+0.72pct year-on-year to 44.6%/45.7%. The improvement in Q3 gross margin narrowed, or was related to the pressure on tonnage prices. Currently, the price of the main raw materials for beer is still in a downward channel. The cost dividend is expected to continue in the short to medium term, and continue to support the improvement of beer profits.

Haitong Securities's main views are as follows:

Liquor: Active deceleration and pressure relief under weak demand, intensifying differentiation and highlighting the Matthew effect

The total revenue/net profit of listed wine companies in the 24Q1-3 liquor sector was +9.3%/+10.7% to 340.063/131.697 billion yuan, respectively. Among them, the 24Q3 single quarter was +0.7%/+2.1% to 96.452/36.015 billion yuan, respectively. The year-on-year growth rate narrowed further compared to Q2, or was related to weak environmental demand and some wine companies actively adjusted pressure relief.

On the revenue side, revenue in the Q3 sector increased slightly year over year. Among them, high-end liquor was more resilient (+9.6%), national sub-high-end (-0.4%) and regional liquor (-17.9%) declined year on year, and internal segmentation intensified.

On the repayment side, contract debt in the Q3 sector was -1.4%/-6.5% month-on-year, and the year-on-year growth rate fell short of revenue. The main reasons included cautious repayment bias in the context of channel pressure, disruptions in dealer repayment rhythms and credit cycles, and active regulation by some wine companies. After restoring contract debt, high-end and national sub-high-end /regional liquor revenue was +7.8%/+5.1%/-15.7%, respectively.

On the revenue side, the overall sector is under pressure &; the internal segmentation trend is consistent with the revenue side. The median year-on-year growth rate of sales revenue/net operating cash flow in the Q3 industry was -1.5%/-20.5%, respectively. Among them, high-end, national sub-high-end, and regional liquor revenue were +3.8%/+12.4%/-11.7%, respectively.

On the profit side, Q3 gross margin continued the upward trend while the cost side stabilized, and the sector's profitability increased steadily. The gross margin of the Q3 sector was +1.13pct year on year. Among them, high-end, sub-high-end and regional wines were +0.84pct/-1.65pct/-3.61 pct, respectively, and the product structure of some wine companies declined. In terms of period expenses, the sales/management expenses rate for the Q3 sector was +0.04 pct/+0.02 pct, respectively. It was observed that some brands increased their investment in marketing and market expenses during the peak season in response to weak demand. The slight increase in gross sales margin boosted the sector's net interest rate. Net interest rates for the 24q1-3/24q3 industry were +0.49pct/+0.48pct year-on-year, respectively, to 38.7%/37.7%.

In terms of return to investors, Wuliangye launched a 3-year dividend plan. Shede Liquor plans to repurchase no more than 0.2 billion yuan of the company's shares for employee incentives. Since this year, major wine companies have successively launched sincere dividend and repurchase plans, which are expected to steadily raise shareholders' return expectations and enhance sector investment value.

Overall, in a weak demand environment, industry operations are under pressure, and downstream channel repayments are becoming more cautious. Major wine companies have begun to actively adjust to relieve channel pressure, leading to a month-on-month decline in liquor revenue/payback/cash flow/profit, a partial year-on-year decline, and repayments/cash flow weaker than apparent revenue. The differentiation among brands has further intensified. Under the triple influence of the environment, competition, and inventory removal, some wine companies' reports fell short of expectations. Structurally, high-end liquor is growing steadily, Maotai continues to lead, national demand for sub-high-end is under pressure and continues to diverge. Fenjiu continues to grow. There are bright spots in the differentiation of famous regional wines. Gujing Gongjiu and Jinshiyuan maintained rapid revenue growth, and Laobaijiu performed well.

Beer: Weak demand in Q3 puts pressure on volume and price during peak season, and cost dividends continue to support profits

Companies listed in the 24Q1-3 beer sector (A share) achieved total operating revenue/net profit of 60.233/8.402 billion yuan, -1.9%/+7.6% year-on-year, and 19.964/2.599 billion yuan in Q3, respectively, in a single quarter, of -3.3%/-2.3% year-on-year. Overall, beer companies' reports for the third quarter were generally under pressure. The revenue/profit side both decelerated from the first half of the year, with some year-on-year declines, mainly due to factors such as weak external consumer demand and extreme weather in some regions affecting beer sales volume and structure. Pearl River Brewery and Yanjing Brewery performed relatively well. Although Q3 revenue decelerated month-on-month, they still recorded positive year-on-year growth, with a year-on-year increase of +6.9%/+0.2%, respectively. The profit side also continued to grow by double digits. Net profit to mother in Q3 was +10.6%/+19.8%, respectively.

Profit improvements have narrowed due to pressure on tonnage prices, and cost dividends are expected to continue. The gross margin of the 24Q1-3/24Q3 beer sector (A share) was +1.67pct/+0.72pct year-on-year to 44.6%/45.7%. The improvement in Q3 gross margin narrowed, or was related to the pressure on tonnage prices. On the cost side, the price of the main raw materials for beer is currently still in a downward channel. The cost dividend is expected to continue in the short to medium term, and continue to support the improvement of beer profits. On the cost side, the sales, management, and period expense ratios for the Q3 single-quarter A-share beer sector were +0.72 pct/+0.36 pct/+0.82 pct to 14.3%/5.4%/19.2%, respectively. In a weak demand environment, the increase in cost investment may limit profit improvement to a certain extent. Net interest rates for the 24Q1-3/24Q3 beer sector (A shares) were +1.23pct/+0.13pct year-on-year to 13.9%/13.0%, respectively.

Investment advice: recommend high-end liquors with a rigid and steady increase in demand: Kweichow Moutai (600519.SH), and Luzhou Laojiao (000568.SZ), as well as sub-high-end liquors with relatively excellent regional markets and strong growth potential for large products: Shanxi Fenjiu (600809.SH), Gujing Gongjiu (000596.SZ), Yingjiagongjiu (603198.SH), and Jinshiyuan (); focus on the beer sector benefiting from restaurant recovery, consumption scenario recovery, and cost reduction: Yanjing Beer (603369.SH 000729.SZ), Tsingtao Brewery (600600.SH), Chongqing Beer (600132.SH), China Resources Beer (00291).

Risk warning: Competition in the industry has intensified, the high-end process falls short of expectations, and raw material prices have risen.