Since mid-December 2021, the liquor sector has shown a trend of adjustment. On January 13, the liquor sector adjusted again, and the share price of leading stock Kweichow Moutai fell by more than 4%. Fund sources believe that the valuation of the liquor industry is still relatively high, and the performance is difficult to exceed expectations, and it is difficult for the short-term sector to have an overall upward opportunity. For the market outlook, he is still optimistic about the investment opportunities of high-end and sub-high-end liquor for a long time.
High short-term valuation
On January 13, there was a collective adjustment in the liquor sector. Kweichow Moutai fell by 4.56%, and Shede Liquor and Jiugui Liquor fell by more than 5%. After a period of recovery in the second half of 2021, the liquor sector has continued to decline recently. Flush data shows that in the past month, the liquor index has corrected by more than 17%.
Regarding the reasons for the market adjustment, CCB Fund stated that it was mainly due to the failure of expectations for the price increase of the liquor leading companies, and the rebound of the liquor sector, which increased the valuation. Although the fundamentals have not changed, under the disturbance of external negative factors, some of the funds involved in the early stage were profited, which led to adjustments in the food and beverage industry.
A manager of a public offering fund in Beijing said: “As leading liquor stocks fall, valuation and fundamentals are still the main factors. On the one hand, the valuation of liquor stocks is relatively expensive. Measured from 2010 onwards, the price-earnings ratio and price-to-book ratio of liquor have increased significantly. The quantile continues to be at a historically high level; on the other hand, from the perspective of the industry’s prosperity, the profit expectations of the liquor industry are stable, and the marginal change has not changed significantly.”
He believes that in the short term, under the premise that the valuation is relatively high and the profit does not exceed expectations, it is difficult for the liquor sector to show an overall upward trend. In the long run, the solid fundamentals of the liquor industry have not deteriorated, and it still has significant long-term investment value.
Despite the high volatility in stock prices, industry volatility is much lower than stock price volatility in the view of fund managers. Li Dan, fund manager of China Life Security Fund, said that the fundamentals of the liquor sector are relatively certain. From the perspective of the entire industry cycle, neither volume nor price has declined, so the liquor sector is still in a boom cycle.
Optimistic about high-end and sub-high-end companies
Liquor stocks continue to pull back, is it time for a low-level layout?
Bao Jigang, chairman of Wukong Investment, said: “After a round of valuation adjustments, the liquor industry has a relatively high degree of certainty. It has rebounded to a certain extent before, and the stock price has fallen out of the bottom area. If it wants to make new highs in the future, there is still a lack of new catalysts. It may take a long time. Since 2016, a higher proportion of the rise in the share price of liquor stocks has come from the increase in valuation. In 2021, the ‘scissors gap’ of exposure to PPI and CPI will be large. The consumer industry has digested valuations. In 2022, under the background of the gradual convergence of PPI and CPI exposure, the upstream costs of consumer companies will decline, and many wine companies are raising prices. These companies may have valuations and performance. Double up.”
For the market outlook, fund managers generally expressed that they are optimistic about high-end and sub-high-end liquor companies. Hou Hao, fund manager of China Merchants Fund, said that in the competitive landscape of the liquor industry, leading enterprises have obvious advantages, and sub-high-end liquor has continuously deepened its brand culture, showing a rapid growth trend both in terms of national expansion and product upgrades. From the perspective of stock prices, the stocks that have risen the most in the past two years are the sub-high-end liquor companies that have expanded from regional to national.
Yu Xiaochang, research director of Xiangju Capital, said that he is more concerned about the investment opportunities of sub-high-end liquor and small and medium-sized liquor companies. Under the trend of liquor consumption upgrading, leading enterprises have raised prices to the entire industry, resulting in a double increase in product volume and price. First, dealers may increase delivery before the price increase, and second, the company’s profitability will be further improved after the price increase.
Editor: Yang Chong
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