Despite facing weak consumption, market volatility, and intensifying competition, the baijiu industry continues to maintain steady growth, especially in the high-end segment.
Song Shuyu, the chairman of the China Alcoholic Drinks Association, stated at the "2024 China Baijiu National Judges Annual Meeting" in August 2024 that in the first half of the year, the national baijiu production, sales revenue, and realized profits increased by 3%, 11%, and 15% year-on-year, respectively, achieving a simultaneous increase in volume, price, and profit.
Data from Wind shows that in the first half of 2024, the total operating income of the 20 A-share listed baijiu companies increased by 13.07% year-on-year, and the net profit attributable to the parent company increased by 14.31% year-on-year.
Fangzheng Securities believes that overall, the weak macro demand recovery, coupled with the proactive adjustment of the channel system and the regulation of the delivery speed by baijiu companies during the off-season, has led to a smooth transition growth for the sector. However, the year-on-year growth rate has slowed down quarter by quarter, with off-season adjustments taking priority. The year-on-year increase in revenue and net profit attributable to the parent company in the first half of 2024 has narrowed compared to the first half of 2023.
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Performance differentiation is evident, with high-end liquor remaining robust.
The competitive landscape within the market is constantly changing, and the competition for market share among different types of baijiu is becoming more intense. From the recently disclosed performance of the 20 A-share baijiu companies in the first half of 2024, it is evident that the baijiu industry's performance is highly differentiated. Six baijiu companies have achieved an operating income of over ten billion, namely Kweichow Moutai (600519), Wuliangye (000858), Yanghe Share (002304), Shanxi Fenjiu (600809), Luzhou Laojiao (000568), and Gujing Gongjiu (000596). At the same time, six baijiu companies have seen a year-on-year decline in operating income, namely Shede Wine (600702), Shunxin Agriculture (000860), Huangtai Liquor (000995), Golden Seed Liquor (600199), Jiugui Liquor (000799), and Rock Shares (600696).
"Mao Wu Yang" remains in the top three, with a significant lead in performance. In the first half of 2024, Kweichow Moutai topped the operating income with 83.451 billion yuan, a year-on-year increase of 17.56%; the net profit attributable to the parent company was 41.696 billion yuan, a year-on-year increase of 15.88%. Next was Wuliangye, with an operating income of 50.648 billion yuan, a year-on-year increase of 11.30%; the net profit attributable to the parent company was 19.057 billion yuan, a year-on-year increase of 11.86%. Yanghe Share's performance slightly increased in the third place, with an operating income of 22.876 billion yuan, a year-on-year increase of 4.58%; the net profit attributable to the parent company was 7.947 billion yuan, a year-on-year increase of 1.08%.
CITIC Securities believes that in the first half of the year, the baijiu industry was "affected by weakening demand, with a noticeable slowdown in performance growth. Among them, high-end liquor remained relatively robust, while the second-tier high-end continued to face pressure, and regional liquor differentiation increased."
Among the six baijiu listed companies with a year-on-year decline in operating income, four experienced a decline in both revenue and net profit. Shede Wine achieved an operating income of 3.271 billion yuan in the first half of 2024, a year-on-year decrease of 7.28%; the net profit attributable to the parent company was 591 million yuan, a year-on-year decrease of 35.73%. "In the first half of 2024, the baijiu industry as a whole was still in an adjustment period, affected by the economic environment. The business demand for second-tier high-end baijiu did not meet expectations, and although banquets continued to grow, the volume was still small. The company's traditional advantage product, Taste Shede, is in a phased inventory reduction stage. Therefore, the company's semi-annual operating income and net profit have decreased year-on-year," Shede Wine stated in its semi-annual report.
Jiugui Liquor achieved an operating income of 994 million yuan in the first half of 2024, a year-on-year decrease of 35.50%; the net profit attributable to the parent company was 121 million yuan, a year-on-year decrease of 71.32%. In its semi-annual report, Jiugui Liquor stated that the decline in performance was "mainly due to the decrease in income from the Inner Reference series, Jiugui series, and other series."Rock Shares experienced the most severe decline in performance, achieving a total operating revenue of 191 million yuan, a year-on-year decrease of 77.32%; the net profit attributable to the parent company was -77 million yuan, a year-on-year decrease of 244.60%. Regarding the reasons for the significant decline in performance, Rock Shares did not provide much explanation, merely stating that "it was mainly due to the reduction in liquor sales."
Huangtai Liquor Industry achieved a total operating revenue of 66 million yuan in the first half of 2024, a year-on-year decrease of 12.07%; the net profit attributable to the parent company was -4 million yuan, a year-on-year decrease of 230.75%. The main reasons for the transition from profit to loss in Huangtai Liquor Industry's performance are twofold: "1. Influenced by the market environment, the overall competition in the liquor industry has intensified, putting pressure on the company's operations. 2. The company moderately increased its marketing efforts, resulting in increased sales and administrative expenses compared to the same period last year."
According to the data disclosed in the semi-annual report, Huangtai Liquor Industry's sales expenses increased by 29.80% year-on-year, and administrative expenses increased by 7.71% year-on-year in the first half of 2024.
Contract Liabilities Grow Year-on-Year, with Wuliangye Seeing the Largest Increase
Information shows that contract liabilities (advances from customers) refer to the obligations of an enterprise to transfer goods to customers for which it has received or is entitled to receive consideration from the customer. Generally, it can reflect the enterprise's bargaining power and control over downstream customers. Looking at the changes in advances from customers, high-end liquor companies have performed the best.
Wind data indicates that in the first half of 2024, the total contract liabilities of 20 A-share liquor companies listed on the stock market were approximately 38.552 billion yuan, a 6.48% increase from 36.205 billion yuan in the first half of 2023, with 8 companies showing year-on-year growth and 12 companies showing a decrease.
Companies with larger year-on-year increases in contract liabilities include Kweichow Moutai, Wuliangye, and Luzhou Laojiao, while those with larger decreases include Shunxin Agriculture, Shede Wine, Kouzi Jiao, Rock Shares, and Jinshiyuan.
The semi-annual report for 2024 shows that Kweichow Moutai's contract liabilities were about 9.993 billion yuan, a 36.26% year-on-year increase from 7.334 billion yuan in the first half of 2023; Wuliangye's contract liabilities were about 8.158 billion yuan, a 123.57% year-on-year increase from 3.649 billion yuan in the first half of 2023; Luzhou Laojiao's contract liabilities were about 2.342 billion yuan, a 21.10% year-on-year increase from 1.934 billion yuan in the first half of 2023.
Ping An Securities believes that Wuliangye's profitability is stable, and its contract liabilities are impressive. "The willingness of distributors to make payments is strong."
"The company's semi-annual report shows that contract liabilities and advances from customers have reached a new low in recent years, even lower than during the pandemic period. Why is that?" An investor asked this question to the chairman of Jinshiyuan (603369), Gu Xiangyue, during the 2024 semi-annual performance briefing meeting.In response to this, Gu Xiangyue explained, "The company's sales mainly follow a prepayment model, and the disclosed amount of contract liabilities represents the amount received but not yet shipped (for such normal settlement of advance payments, the company does not offer cash discounts). On one hand, the company's back-end supply capacity has been strengthened, shortening the cycle from payment to shipment; on the other hand, distributors themselves have increased their safety stock, making off-season ordering more leisurely. The aforementioned factors are the main reasons for the year-on-year decrease in contract liabilities."
In the first half of 2024, the contract liabilities of Jin Shiyuan were approximately 627 million yuan, a decrease of 1.773 billion yuan from the end of 2023's 2.4 billion yuan, and a year-on-year decrease of 44.46% compared to the 1.129 billion yuan in the first half of 2023.
"The main reason is the seasonal factors leading to a reduction in advance receipts," Jin Shiyuan explained in the 2024 semi-annual report.
Operating cash flow growth is relatively fast, but accounts payable are also not low.
Over the years, the net operating cash flow of the liquor industry has always been relatively abundant.
Data from Shenwan Hongyuan Securities Research shows that in the first half of 2024, the net operating cash flow of the liquor industry was 69.308 billion yuan, a year-on-year increase of 39.39%; the cash received from the sale of goods and the provision of labor services was 235.405 billion yuan, a year-on-year increase of 17.34%, which is faster than the revenue growth rate. Among them, in the second quarter of 2024, the net operating cash flow of the liquor industry was 31.966 billion yuan, a year-on-year increase of 55.60%; the cash received from the sale of goods and the provision of labor services was 106.737 billion yuan, a year-on-year increase of 23.29%, with the cash flow growth rate being faster than the revenue growth rate.
Looking at the products, the net operating cash flow of high-end liquor is about 53.318 billion yuan, a year-on-year increase of 44.97%; the net operating cash flow of second-tier high-end liquor is about 10.697 billion yuan, a year-on-year increase of 11.18%; the net operating cash flow of mid-range liquor is about 5.295 billion yuan, a year-on-year decrease of 10.87%.
In the first half of 2024, the net operating cash flow of companies such as Kweichow Moutai, Wuliangye, Luzhou Laojiao, Shanxi Fenjiu, Jin Shiyuan, Yingjia Gongjiu, and Laobaigan liquor all achieved positive growth, with Kweichow Moutai having the largest amount, reaching 36.622 billion yuan, a year-on-year increase of about 21% compared to the first half of 2023's 30.387 billion yuan.
"The main reason is the increase in cash received from the sale of goods in this period and the increase in the net increase of customer deposits and interbank deposits of the holding subsidiary Kweichow Moutai Group Financial Co., Ltd.," Kweichow Moutai explained in the 2024 semi-annual report.
Shenwan Hongyuan Securities believes that from the perspective of net operating cash flow, all high-end liquors are positive, with Moutai performing the best; among the second-tier high-end liquors, Yanghe, Fenjiu, and Jin Shiyuan perform well; among the mid-range liquors, except for Laobaigan and Yingjia, there are varying degrees of decline compared to the same period last year.It is worth noting that the increase in accounts payable in the liquor industry in the first half of 2024 is also significant.
Wind data shows that in the first half of 2024, the accounts payable of the 20 A-share listed liquor companies was approximately 28.036 billion yuan, a year-on-year increase of 21.34% compared to 23.106 billion yuan in the first half of 2023. Among them, Wuliangye had the highest accounts payable, about 8.952 billion yuan, a year-on-year increase of 17.56% compared to 7.615 billion yuan in the first half of 2023.
Looking at the performance data from the first half of 2024, Huatai Securities believes that the liquor industry shows three major characteristics: First, the industry competition has intensified, with most companies' revenue performance within market expectations, and some companies achieving eye-catching profit performance through cost optimization. Second, the industry differentiation continues to extend, with significant differentiation between different price bands, and even within the same price band or regional liquor companies. Overall, the mass-market price segment has performed brightly, high-end liquor and local leaders have shown a stable overall performance, and there is still pressure in the second-tier high-end segment. The internal competition within Suzhou liquor and Wanzhou liquor is also significantly differentiated. Third, the governance of leading liquor companies has become more market-oriented and refined, with significant improvements in cost control among various liquor companies; long-term dividend plans have been successively implemented, and the governance of liquor companies has become more market-oriented.
Huatai Securities believes that in 2024, the liquor industry will continue to maintain a steady recovery trend, and the peak and off-peak characteristics of the season may be more pronounced; as the economy continues to repair in the second half of the year, consumer recovery will have stronger support. "The trend of increasing industry concentration is expected to continue, and we believe that well-known liquor companies will still achieve a development speed faster than the industry, and the industry value and growth potential are expected to return steadily."
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