news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

since the beginning of this year, against the backdrop of a sluggish consumer environment, the liquor sector has continued to fall. among them, luzhou laojiao's cumulative decline exceeded 31%, exceeding the csi liquor index's -24%, and also the largest decline among the leading liquor companies.

in addition to macro and industry factors, has luzhou laojiao encountered any problems in its own operations, resulting in the market's relatively pessimistic valuation of it?

01

since the last round of liquor recovery, luzhou laojiao has achieved strong growth.

from 2017 to 2023, the compound annual growth rate of revenue and net profit attributable to shareholders reached 19.5% and 31.5%, which is much faster than that of moutai and wuliangye. looking at the first quarter of 2024, the performance also maintained a high growth rate of more than 20%.

on august 29, luzhou laojiao released its 2024 semi-annual report, with operating income of 16.905 billion yuan in the first half of the year, a year-on-year increase of 15.84%; net profit attributable to shareholders of the parent was 8.028 billion yuan, a year-on-year increase of 13.22%.

in terms of quarters, luzhou laojiao's operating income in q2 this year was 7.716 billion yuan, a year-on-year increase of 10.51%. its net profit attributable to shareholders was 3.454 billion yuan, a year-on-year increase of only 2.24%. its non-net profit was 3.442 billion yuan, a year-on-year increase of only 2.68%.

although luzhou laojiao's revenue growth in the first half of the year reached its development goal guidance of "revenue growth of no less than 15%" in 2024, which was set at the beginning of the year, its net profit growth in the first half of the year was lower than most brokerages expected.

according to statistics, 11 securities firms including huachuang securities, guotai junan securities, china merchants securities, huatai securities, and guosen securities had previously made forecasts for luzhou laojiao's net profit in the first half of the year. it was generally expected that the net profit in the first half of the year would increase by 18%-21% year-on-year. however, the company's net profit growth of 13.22% was lower than expected.

judging from the past and current fundamentals, the capital market seems to have no reason to be so pessimistic. however, the market is trading on future expectations, that is, the fear that performance cannot continue to grow at a high rate, and the valuation is being cut madly.

putting aside revenue and profits, we use other core indicators to infer the actual operating conditions of luzhou laojiao.

first, inventory and inventory turnover. in 2023, luzhou laojiao's inventory was 11.622 billion yuan (continued to rise to 11.827 billion yuan in the first quarter of this year), while it remained at around 3 billion yuan in the years before the epidemic. it began to increase sharply in 2020. it can be seen that channel sales have slowed down significantly, and a lot of goods have been piled up in the winery.

inventories have risen sharply, while inventory turnover has continued to decline. compared with its leading peers, luzhou laojiao has experienced the largest decline, and the downward slope is also the steepest, while the rest of the wine companies have either improved significantly or remained relatively stable.

based on reasonable speculation based on inventory and changes, the amount of luzhou laojiao's backlog in the channel may be more serious.

but we don’t know how much there is. however, we can roughly infer the supply and demand situation from the wholesale price. at present, the wholesale price of guojiao 1573 is 870 yuan, which is much lower than the past three years, which is enough to prove that the channel inventory is large enough.

second, accounts receivable financing.

as of q1 2024, luzhou laojiao's accounts receivable financing was 5.34 billion yuan, a significant increase of 123% from 2019.

the receivables financing here refers to the winery pledging its accounts receivable and getting money from the bank. it is a supply chain financing tool that solves the funding problems of large channel merchants.

the sharp increase in data suggests that the dealers' cash flow is tight and they have not paid the money to the wineries in time, which has a similar effect to accounts receivable. in fact, except for moutai, which does not have financing for accounts receivable, wuliangye, luzhou laojiao, shanxi fenjiu and other leading wine companies have all seen a significant increase after the epidemic.

third, long-term loans.

since 2022, luzhou laojiao has started to have large long-term loans, which have swelled to 11.99 billion yuan in the first quarter of this year, while maowu fen has 0. you know, luzhou laojiao has 32.1 billion yuan in cash on its account, so it seems unnecessary to borrow long-term from financial institutions.

luzhou laojiao said that it would use low-cost borrowing funds, combined with its own funds, to carry out important projects such as smart brewing technology transformation and brand enhancement, and carry out reasonable cash management according to project progress, moderately increase financial leverage, and improve capital returns and company profits.

but in fact, this may not be the case. in march 2023, longma xingda microfinance co., ltd., a subsidiary of luzhou laojiao, officially launched the industrial chain financial service platform. the platform simultaneously launched three loan products - "wine merchant loan", "wine enterprise loan" and "wine employee loan", which are respectively aimed at downstream distributors, upstream suppliers and high-quality individual customers of luzhou laojiao's industrial chain.

it is reasonable to speculate that luzhou laojiao lends money to channel distributors at a low borrowing cost. on the one hand, it can earn the interest difference in the middle, and on the other hand, the distributors have more working capital to purchase goods to boost the current performance. this actually also reflects the lack of market demand and the great operating pressure on distributors, which also implies the channel inventory pressure.

from the above three data, luzhou laojiao's channel inventory may be more severe than its peers. this also determines that the winery cannot continue to push a large amount of goods to the channel to improve performance. it is reasonable to speculate that the high-growth performance will return to a medium-to-low growth rate. this may also be the core logic of the extremely pessimistic capital market.

02

currently, the pe of the csi liquor index is 18 times, which has returned to the level at the end of 2014, and is even lower than the big bear market in 2018.

obviously, the liquor industry is currently facing some operational difficulties.

on the one hand, there is the risk of inventory congestion in distribution.

in the three years since the epidemic, especially in 2022, a large number of consumption scenarios have been missing, but the performance of liquor companies has continued to show a high growth trend, which is not in line with normal logic. obviously, the goods that are not consumed by consumers are squeezed into the channels, so that starting in 2023, the whole industry generally has a deep inversion of zero-batch prices.

no one knows how much inventory is available in the distribution channels of the entire industry. however, judging from the continuous surge in inventory of mainstream wine companies, it is obviously not optimistic.

in addition to channel inventory, liquor inventory also includes investment inventory and consumer inventory. among them, investment inventory will naturally form negative feedback because the price increase expectations of liquor companies have been eliminated and the retail and wholesale prices are seriously inverted, which will drive selling pressure on the market. therefore, there is a risk of a dammed lake in liquor inventory.

since last year, the liquor industry has been experiencing a serious phenomenon of price inversion, and the most stable wholesale price of moutai has also fallen sharply in the first half of this year. among them, the wholesale price of moutai 1935 has fallen back to around 800 yuan, the same as the ex-factory price, significantly lower than the recommended retail price of 1,188 yuan, and a 60% drop from the historical peak of 2,000 yuan.

inventory is connected to the supply of wineries on one hand and the demand of end consumers on the other. currently, many mainstream wine companies have eased the pressure of price and inventory by suspending shipments, etc. however, the effect is not particularly ideal.

in fact, the most important thing for inventory unblocking is to rely on the improvement of terminal demand to drive inventory removal. however, the current social retail growth rate has declined, and the trend of consumption downgrade is quite obvious, which has a significant impact on the demand for high-end liquor.

on the other hand, there is the long-term demand issue for high-end liquor.

for many years, the continued prosperity of high-end liquor has been closely related to real estate.

in the past 20 years, real estate has been a pillar industry of china's economy. according to data released by the national bureau of statistics, the real estate industry directly accounts for less than 10% of gdp, and if the related construction industry is included, it may account for about 15%.

however, the upstream and downstream industrial chains driven by real estate are particularly large, including cement, steel, building materials, chemicals, machinery, construction, decoration, home furnishings, home appliances, and related financial services, etc. if all these are added together, the direct and indirect contribution of real estate to the economy may account for 30%-40%.

these industries have low technical barriers, but they can generate and create a huge liquor consumption scene. therefore, real estate is the main trump card industry for high-end liquor consumption.

however, the property market has been falling sharply since it peaked in 2021. in the first seven months of this year, china's commercial housing sales were 5.33 trillion yuan, a sharp decrease of 5.3 trillion yuan from the same period in 2021, a cumulative decline of 50%. the real estate industry is under obvious pressure, and the consumption of high-end liquor has naturally tended to decrease, while the prosperity of other industries such as automobiles and semiconductors cannot offset the sharp decline in real estate.

in addition to business consumption, high-end liquor also has personal consumption. personal consumption is closely related to the accumulation and growth of wealth among the wealthy. the latter has also been hit by the decline in housing prices and the stock market, and tends to reduce high-end consumption.

the pressure on the property market will have a far-reaching impact on the demand for high-end liquor. over the past 20 years, the real estate industry has experienced ups and downs, with a clear cycle, and in the future, the real estate industry will continue to slide into a recession and will no longer be cyclical.

whether in the short to medium term or in the long term, the market expects that the overall growth of high-end liquor will encounter some pressure, and therefore gives liquor a very pessimistic valuation pricing.

03

it is undeniable that liquor is the best track for a-share business model—— payment before delivery there is no capital expenditure, and the profit earned is free cash flow, which has a basis for generous dividends and the capital value can continue to expand.

moreover, leading high-end liquor companies still have considerable growth potential. for example, it will not be difficult for moutai to maintain a growth rate of more than 10% in the next few years.

compared with moutai and wuliangye, luzhou laojiao has a nationalization logic to follow, and its performance growth will not slow down significantly.

from the perspective of business model and growth potential, high-end liquor still has investment opportunities in the long term. however, high performance growth will gradually become a thing of the past, and it is inevitable that the rate of return will tend to decline in the future.

at present, the 18 times valuation level of liquor has fully priced in the long-term and short-term negatives, and the downward space of valuation should be relatively limited. however, it is not realistic to expect a reversal and upward trend immediately.

firstly, the current market sentiment is low, and the demand for risk aversion is strong, so growth sectors including liquor are not popular. secondly, the real estate industry has not yet bottomed out, which also means that there is a certain pressure on macroeconomic growth, and it does not support a v-shaped reversal of liquor.

so in terms of market performance, liquor stocks may only be able to continue to trade time for space and wait for consumption to truly begin to recover. 。