In the past two weeks, there have been many price corrections of Maotai series products, and non-standard and Pfizer products have been adjusted across the board. There are many factors leading to this adjustment. We believe that there are mainly the background of wealth effect and Maotai channel reform, as well as the channel panic destocking caused by short-term pessimism. We believe that this price decline is mainly due to the extreme reaction of negative emotions. It is expected that the rating will stabilize soon, and the price center may be around 2500 yuan. There are many factors leading to this adjustment. We believe that there are mainly the background of wealth effect and Maotai channel reform, as well as the channel panic destocking caused by short-term pessimism. We believe that this price decline is mainly due to the extreme reaction of negative emotions. It is expected that the rating will stabilize soon, and the price center may be around 2500 yuan.
The general background of the weakening of wholesale prices is the weakening marginal wealth effect on the demand side and the sufficient supply of Maotai. (1) Demand side: the marginal weakening of wealth effect leads to the weakening of the demand for high-end products such as Maotai (especially super high-end products). This logic is mentioned in many reports and will not be repeated here. (2) Supply side: Maotai has abundant supply. After the superposition channel reform, the shipping channel is smooth, and the social supply is gradually increasing. Since 2016, the supply of Maotai base liquor has increased significantly, creating a prerequisite for social investment in Maotai. At the same time, the channel reform in Maotai since 2021 has solved the phenomenon of unobstructed direct delivery (cattle blocking the channel), so that the supply of manufacturers can reach the terminal. In this context, the contradiction between supply and demand in Maotai has been alleviated, the determinant of pricing has shifted from the supply side to the demand side, and the callback of pricing after the off-season is normal.
The short-term epidemic led to the lack of scenes and panic selling among dealers, accelerating the adjustment of pricing. The first tier cities are more than expected. The consumption scenario of Shenzhen and Shanghai is more serious, which affects the demand of high-end baijiu. The supply side of Moutai is more normal. According to the channel research, dealers basically completed 29% of the annual plan volume in the early March, and the progress was not slower than the normal year. In addition, it should be mentioned that the dealer’s confidence also has a significant impact on the wholesale price. When the expected wholesale price rises, there will be reluctance to sell and hoard goods, resulting in reduced supply and increased demand. When the dealer is pessimistic about the follow-up, it will increase the shipment volume, speed up the shipment speed, and even sell the goods hoarded in the early stage. Recently, dealers are pessimistic and even panic. Many terminals basically have no cash flow. At this time, selling circulating goods to realize capital turnover is an option. Therefore, the rating is the result of supply and demand, but in the process of realization, the dealer’s attitude can affect the result, and even the main contradiction in the short term. The last two weeks are the most tense time for dealers.
The recent rapid correction has its particularity, which is an extreme response to negative emotions. This pessimism will improve with the control of the epidemic. We expect that the rating may stabilize soon. As for the calculation of the reasonable position of the rated price, we prefer the backward push method of aged wine. The assumption is that aged wine has always been the result of fair trading in the market and has the function of the coordinate system. At the same time, from historical experience, Maotai has a value-added space of 100200 yuan per year, and the price of bulk Maotai in 2022 may be around 2500 yuan. Picking up the rising trend again requires changes on the demand side and the supply side. At present, the supply side may be more practical. At the same time, we found that Wuliangye Yibin Co.Ltd(000858) wholesale price has remained stable while Maotai’s price has declined. The reason behind this is that the enterprise gives dealers confidence through phased adjustment of sales plan and terminal brand marketing.
Investment strategy: the downward rating has exacerbated the market’s concern about fundamentals. We believe that in the case of short-term panic, we should consider the long-term space. The medium and long-term value of the enterprise will not change. We adhere to the early view and focus on the long-term value layout, and the target of valuation decline. Specific targets such as Shede Spirits Co.Ltd(600702) , Sichuan Swellfun Co.Ltd(600779) , Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , Wuliangye Yibin Co.Ltd(000858) , Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) and Anhui Gujing Distillery Company Limited(000596) in regional baijiu. In terms of popular products, the cost rises, the scene weakens, and the industry concentration may change. We insist on recommending industry leaders, focusing on beer, condiments, quick freezing and other tracks, such as Tsingtao Brewery Company Limited(600600) , Foshan Haitian Flavouring And Food Company Ltd(603288) , Fu Jian Anjoy Foods Co.Ltd(603345) , Beijing Yanjing Brewery Co.Ltd(000729) , Qianhe Condiment And Food Co.Ltd(603027) , Angel Yeast Co.Ltd(600298) , etc.
Risk warning: the impact of the epidemic may be repeated; Demand recovery is not strong enough; Food safety issues, etc
