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on september 18, liquor stocks in the a-share market fell collectively again. as of midday close, rock shares hit the limit, and kweichow moutai fell 2.06%, with the share price closing at 1,277.3 yuan per share. in addition, jinhui liquor, yilit, tianyoude liquor, etc. all fell by more than 2%. it is worth noting that, without adjustment, kweichow moutai fell to 1,268.89 yuan in early trading, breaking the low of 1,333 points before october 31, 2022.

from a longer-term perspective, as of midday closing, kweichow moutai's year-to-date decline was more than 24%, with a market value of 1.6 trillion yuan, falling to fourth place in the a-share market. compared with its high of 2,489.11 on february 18, 2021, kweichow moutai's decline was nearly halved.

from the perspective of valuation, as of september 13, kweichow moutai's price-to-earnings ratio has dropped to 20 times, a significant decline compared to the valuation premium of over 70 times three years ago. the overall price-to-earnings ratio of the csi liquor index has dropped to 16.58 times, and the price-to-book ratio is 4.86 times, which is the 22% percentile in the past decade.

why does the liquor sector continue to fall?

why is the liquor sector falling? guotai junan research report pointed out that the liquor industry's sales volume from august to september slightly rebounded month-on-month, but year-on-year, total demand in most regions still fell, among which the price pressure was significantly greater than the sales pressure (the price pressure was represented by feitian), and product sales were mainly focused on the core flow items in the price range of 100 to 200 yuan and above 200 yuan.

the above research report also pointed out that the liquor channels have been continuously squeezed in recent times in terms of profit margins and turnover, and the effect of expenses on channel cash collection has been limited. combined with the financial data of liquor companies in the second quarter of 2024 (cash flow and prepayments are under marginal pressure), the research report believes that the channels are gradually losing their buffer function, and the development of the inventory cycle will be reflected in a significant decline and differentiation in the company's apparent growth rate.

guosen securities also said that as the mid-autumn festival approaches, the channels are not very active in stocking up, the consumption atmosphere is weaker than last year, and consumers are more rational. affected by consumption expectations, moon cakes, high-end liquor and other gift-like products have declined to varying degrees. in terms of price, the sales of mid-range liquor are better than those of sub-high-end and high-end liquor; in terms of regions, sales in all regions are under pressure.

today's wine price data shows that on september 18, the wholesale price of 2024 feitian moutai (original) 53 degrees/500ml was 2,500 yuan/bottle, the same as yesterday; the price of 2024 feitian (loose) 53 degrees/500ml was 2,365 yuan/bottle, down 15 yuan from yesterday.

at the recent 2024 semi-annual performance briefing of kweichow moutai, investors have raised concerns about the recent hype by self-media about the price fluctuation of moutai liquor. in response, moutai chairman zhang deqin said: "the overall market situation is relatively stable." he further stated that moutai attaches great importance to the market situation. we have conducted in-depth market research in various provinces and regions, held market work meetings in various provinces and regions, and held in-depth discussions with representatives of distributors, e-commerce, group purchases, and provincial and regional self-operated channels to continuously improve the strategic and tactical system that is both systematic and coordinated. this ensures that moutai moves forward steadily.

talking about the change in gross profit margin of kweichow moutai's liquor products, zhang deqin provided detailed data analysis: "in the first half of 2024, the gross profit margin of moutai liquor increased by 0.04% year-on-year, the gross profit margin of series liquor increased by 0.75% year-on-year, and the proportion of series liquor in liquor revenue was 16.09%, an increase of 1.56 percentage points over the same period last year." zhang deqin said that the increase in the proportion of series liquor in the product structure has correspondingly had a certain dilution effect on the gross profit margin of the overall liquor products. however, this does not affect the steady growth of moutai's overall performance, but rather highlights the strategic effectiveness of its diversified development.

most of the top fund managers reduced their holdings in kweichow moutai

in recent years, although the proportion of kweichow moutai held by public funds has decreased, the decline is not significant. however, the reduction of holdings by some well-known fund managers shows that professional investors have different opinions on the future performance of kweichow moutai. some fund managers choose to sell kweichow moutai shares completely or even withdraw from the entire liquor industry, while others continue to be optimistic about the high-end consumer goods market and choose to increase investment when the market is down.

for example, although jiao wei of yinhua fund still held kweichow moutai at the end of the second quarter, his flagship product, yinhua wealth theme fund, no longer had kweichow moutai among its holdings, indicating that he may have cleared out his holdings of the stock. in addition, jiao wei also reduced his holdings of other liquor stocks such as gujing gongjiu, shanxi fenjiu, luzhou laojiao, and yingjia gongjiu in the second quarter.

(above: top 10 holdings of yinhua fuyu theme fund in the interim report; data source: choice, deadline: 2024.6.30)

kweichow moutai was once a long-term heavy holding of yinhua wealth theme fund, and has been its top holding for many quarters. jiao wei said in the quarterly report that for the consumer upgrade industry represented by high-end liquor, it has become a representative of the business model with high roe, high gross profit margin and high moat in the past few years. "however, there is no denying that we are currently at the crossroads of a new round of economic transformation, and these successful business models are facing both external and internal challenges. to a certain extent, the higher the gross profit margin and pricing power in the past, the more vulnerable it is to the impact and questioning of the new round of economic model. in this context, valuation adjustments may precede earnings themselves."

li xiaoxing, another fund manager of yinhua fund, also reduced his investment in kweichow moutai. in the second quarter, kweichow moutai was no longer one of the top ten holdings of the yinhua xinjia two-year holding period fund he managed, but dropped to twelfth place.

at the same time, xiao nan of e fund high quality selection three-year holding fund, lao jianan of huatai value selection fund, and wang chong and zhang xuerong of bocom select fund have all removed kweichow moutai from their list of top ten holdings.

however, some fund products chose to increase their holdings of kweichow moutai against the trend.

e fund long-term value continued to increase its holdings of kweichow moutai in the second quarter, making it the third largest holding. in addition, bocom new growth also increased its holdings by 89,800 shares, making moutai the second largest holding; yuanxin yongfeng xingnuo one-year holding, yuanxin yongfeng youjia life, qianhai kaiyuan shanghai-hong kong-shenzhen advantage selection and other products all increased their holdings in the second quarter, and these funds have all experienced a net value decline of more than 10% since the second quarter.

in the quarterly report, guo jie of e fund said that the consumer stocks he holds heavily have strong stability and sustainability in their business models because of their attributes of being mass-oriented, repeat consumption, and branding. they are very resilient in the face of economic fluctuations. the current downward data is linearly extrapolated by the market, leading to pessimistic views that performance will continue to decline or even have no future, which is obviously contrary to the attributes of the industry itself. "we are confident in the future prospects of such stocks, and pursue vague correctness in the medium and long term. we hold firmly when the current market is pessimistically priced, and expect to obtain steady returns. once the market believes that the economy can stabilize, the stocks related to economy and consumption in our portfolio should perform well."