This year, the liquor sector has adjusted considerably, and the market has been controversial about the stage of Baijiu baijiu. By looking back at several important cycles in the history of the second round of the market, we sought the pre indicators of the Baijiu post cycle, and discussed the current position of the industry in terms of consumption, channel potential, management strategy and long business cycle.
Core view
Baijiu cycle observation: economic heat and liquidity background, infrastructure and consumption upgrading constitute thrust. Chinese Baijiu has experienced three rounds of 19892002, 20032008 and 20082012 cycles since the market reform of confession baijiu. In the study of cycle, we selected liquidity (M2 year-on-year), Moutai relative price, industry capacity expansion, and industrial capital inflow as the pre index of Baijiu post cycle. During the 19892002 year cycle, the output of Baijiu industry reached a high level in 1997. Under the impact of macroeconomic slowdown, tightened industrial policies and counterfeit alcohol cases, output continued to decline to around 2002, and share prices continued to fall. Among the pre indicators, the liquidity was gradually tightened before 1997, and the relative price of Maotai was significantly high. In the 20032008 year cycle, the volume and price of Baijiu liquor increased, which was driven by the construction of fixed assets investment. The cycle of 2008 was mainly affected by the international financial crisis. Baijiu index dropped by 61% in 2008, but it still achieved 5% excess earnings compared with Shanghai and Shenzhen 300. Among the pre indicators, the economy showed an overheating trend before 2008, and the liquidity was gradually tightened, but the relative price of Maotai was at a low and medium level. In the 20092012 cycle, 2012 is the end of the golden decade cycle. The overheating of the industry has led to the in-depth adjustment of output, performance and index. From the driving force, the growth rate of fixed asset investment peaked in 2009 and that of real estate investment peaked in mid-2010. Among the pre indicators, the state tightened liquidity to curb the rapid rise of prices; Demand for high-end wine is over, Moutai’s foam is flying. Industry overheating leads to excessive expansion of production capacity and enters the stage of surplus; In addition, industrial capital also frequently flows into the Baijiu industry. In the current cycle, China’s economy is short term pressure, monetary policy is relaxed. Under the steady growth of economic policy keynote, the risk of big cycle turning point of Baijiu sector is less. The index of Maotai price relative to money supply is at the middle and lower level; The output of the industry decreased, and the expansion of famous liquor production corresponded to the elimination of low-end boxed liquor and local liquor; In view of the rise of capital heat, regulators cooled down in time. Generally speaking, we believe that the current cycle is in the middle stage of Baijiu, not the end, the maturity cycle of industry has been lengthened, and the spiral structure will continue to maintain for a long time.
Consumption inertia cannot be achieved overnight, and the upsurge of reform must follow the trend. Channel talent shows itself the key to the success of Baijiu liquor cycle. The classic case includes Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) in 20032012 years and the second high-end liquor since 2015. The inertia and potential energy of the channel will support the wine enterprises to maintain a high growth rate in the medium and short term; In 2021, Q1 to Q3 Baijiu sector receivable account grew year by year, the number of pre account receivable turnover increased at 2021Q2/Q3 compared to the same period, and the channel potential energy increased in the range. In the medium and long term, the replacement of management is also an important pre indicator of the inflection point of liquor enterprises. Classic cases include Wuliangye Yibin Co.Ltd(000858) secondary entrepreneurship, etc. In 2021, many core companies of Baijiu liquor company, including Kweichow Moutai Co.Ltd(600519) , Wuliangye Yibin Co.Ltd(000858) and so on, are expected to start a new wave of reform. In the long-term, competition depends more on the strength of the brand. Core consumers can guide the consumption trend from top to bottom. Typical cases include Kweichow Moutai Co.Ltd(600519) and so on.
Learn from overseas liquor leaders, and the strong will always be strong if the periodic disturbance does not change. From a longer cycle point of view, leading companies have the ability to survive and grow continuously through the economic cycle. Take overseas spirits leaders Diageo and Baole Liga as examples. In the past 30 years, they have experienced many rounds of economic cycles (about 9 kichin cycles), but the stock price has continued to rise in a long cycle, bringing stable returns to investors. Compared with China’s market, since 1999, after many rounds of economic cycles, Baijiu’s revenue and profit scale has grown greatly. The core of China’s Chinese Baijiu industry’s long term trend is the sustained growth of China’s macro economy in the long term.
We believe that the current Baijiu period need not worry too much. After the continuous adjustment of the sector, the valuation of the price increases. We should pay attention to the high-end liquor Kweichow Moutai Co.Ltd(600519) ( Kweichow Moutai Co.Ltd(600519) , buy). Sub high-end liquor with steady expansion of nationalization Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) ( Shanxi Xinghuacun Fen Wine Factory Co.Ltd(600809) , buy); Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) , Jiangsu Yanghe Brewery Joint-Stock Co.Ltd(002304) (buy) and Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) ( Jiangsu King’S Luck Brewery Joint-Stock Co.Ltd(603369) , buy), which were significantly affected by the outbreak, with the developed economies and significant consumption of Baijiu.
Risk warning: the impact of the epidemic on Baijiu consumption and consumption upgrading is lower than expected, food safety risk, and the applicability of pre indicators is limited.
