We think that the current expectations and fundamentals of the sector performance, industry boom is still in the background, is expected to be the outbreak of the outbreak of Baijiu wind. Select the target with strong business strength and anti risk ability & the main base market is less affected by the epidemic & the performance driving force comes from mature single products rather than investment attraction & reasonable valuation & the performance growth rate of 22q2 is still excellent compared with 22q1.
Key investment points
Taking history as a mirror: the impact of SARS in 2003 was short, and the impact of covid-19 epidemic in 20 years was more far-reaching
For the first time since the 20th century, how do we face the severe stock market epidemic "How does the stock market perform in the face of covid-19 epidemic in 20 years" and "how will the market view the serious epidemic of 22h1 after two serious epidemics" to explore the rebound layout opportunities after this round of epidemic:
Baijiu China: 03H1: SARS epidemic is short and rapid, and it has a short effect on the Baijiu sector. As the SARS epidemic has a "short and fast" feature, it has only a quarter of an impact on China's economy / stock price performance. Since then, China's economy / liquor industry has entered an upward path. In the single Baijiu industry, although the relative profit of 03 years did not outperform the market, it began to benefit from the volume and price rise in 04, and has gained the relative profit in the whole year.
The 20H1:COVID-19 epidemic accelerated the upgrading of Baijiu industry. The post epidemic sector is highly elastic: the high infection rate of COVID-19 epidemic in recent two years has made a far-reaching impact on the economic and social data. At the beginning of the outbreak, risk aversion often made the market enter the adjustment period. However, the early fall and the high performance sub sectors often rebound in the middle and late stages (20 years, Baijiu sector benefited from the acceleration of consumption upgrading, and the price increase + structural upgrading promoted the profit side to achieve high growth in the continuation of the boom, and the 20Q2-3 Baijiu sector gained a bright and absolute relative profit).
22Q1: Baijiu Baijiu is the main reason for the adjustment of the sector. The epidemic is a catalyst: the current Baijiu sector valuation center has been reduced to 28-30X, the main reason: the market is worried about the slowdown in the economy or the demand and industry boom or slowdown of the liquor industry. Meanwhile, it is prudent to see the spring festival start of the 22Q1 liquor industry in the pre epidemic situation, and it also has strong sensitivity to the negative data such as the dynamic sales and inventory.
Standing at present: expectation and fundamentals leading sector performance, Baijiu will be expected after the outbreak of the epidemic.
From the perspective of "which wine companies are less affected by the epidemic" & "which wine companies / price segments can go out of the independent structural market in the future", we believe that there are two major expectation differences in the current market:
1) medium and long term: we think that the Baijiu industry is still in the weak cycle of growth stage, and the high-end and sub high end liquor expansion is faster than expected. We expect that the average annual compound growth rate of Baijiu is 8% in the 202024 years, of which the average annual compound growth rate of high-end liquor and sub high-end liquor can reach 18%/17%.
2) in the short term: under the influence of the epidemic, the performance of 22q2 high-quality wine enterprises may still exceed expectations.
Fundamentals: following the four major characteristics of the 22Q1 Baijiu industry, we think that the importance of decision-makers' capabilities is more prominent in the current environment. At the same time, as the epidemic stage is an important stage of investment, the volume of investment oriented enterprises is facing some pressure. To sum up, we think: we should choose the target with strong business strength and anti risk ability & the main base markets are less affected by the epidemic situation & the performance driving force comes from mature single products rather than investment promotion & the performance growth rate of 22q2 is still excellent compared with 22q1 (the payment situation is excellent / the inventory is low / the approval price is stable and upward. So far, the payment progress of main liquor enterprises has been excellent).
2. Valuation surface: the current / Kweichow Moutai Co.Ltd(600519) value of Baijiu sector is about 64.5/68.7 score in the past 5 years, considering the certainty of Kweichow Moutai Co.Ltd(600519) performance as anchor of the sector valuation.
Emotional side: market sentiment is the key factor to decide the turning point of sector style. We expect that when the epidemic is turning into inflection point, the market sentiment will improve or the Baijiu sector will go up as a whole, and the chance of structural certainty will be strong.
Investment advice
In the context of the industry boom, the current annual report quarter & the phased implementation of wine enterprise reform measures will be the main catalyst at this stage. Considering that the early sector has experienced a decline of "basically facing the good trend unchanged, mainly disturbed by the emotional side" & the sector valuation has also been cost-effective. At the same time, the epidemic may usher in an inflection point, which is expected to boost market sentiment, it is suggested to make a positive layout. At present, we believe that:
1) select high-end liquor with low impact of epidemic situation on performance / with anti risk ability; 2) The target with strong certainty of 22q2 performance growth, good marginal change and reasonable valuation is preferred. The specific elements include: strong business strength and anti risk ability & the main base market is less affected by the epidemic situation & the performance driving force comes from mature products rather than investment promotion & 22q2 still performs well compared with 22q1. Related objects: Kweichow Moutai Co.Ltd(600519) , Wuliangye Yibin Co.Ltd(000858) , Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) , Anhui Gujing Distillery Company Limited(000596) , Shede Spirits Co.Ltd(600702) , Anhui Yingjia Distillery Co.Ltd(603198) , etc.
Risk warning: 1. In the continuous fermentation and prevention and control of China's epidemic situation, or affect the overall Baijiu recovery; 2. Food safety risks.
