CMSC: Practical and stable supply-side reform in the liquor industry, clear signal of industry bottom.

The CMSC released a research report stating that the "difficult period for liquor companies" has arrived, with clear signals of a bottom. Although there has not been a reversal signal in demand yet, the trend of supply contraction is clear. Based on our comparative research with the last cycle, the industry has entered the "difficult period for liquor companies". Liquor companies are finding it harder to collect payments, and there have been some improvements in the market supply and demand relationship. Although the sector's performance may continue to be under pressure for the next 1-2 quarters, the health of the distribution channels is starting to improve. Combined with the current low positions, the signals of a bottom are clear, and stock prices may lead fundamental factors by 2-3 quarters to reverse. The main points of view of CMSC are as follows: Demand is weak but in line with expectations, companies control inventory to support prices and improve distributors' perception Feedback from distributors at this year's Sugar and Wine Fair indicates that the overall situation is similar to that after the Spring Festival, with no significant changes in demand post-holidays. Business conditions have not improved, but banquet sales have seen slight growth due to a lower base. Some markets have good banquet reservations for the second quarter. Supply continues to be restrained with Maotai and Wuliangye delivering in small batches, keeping industry prices relatively stable. After the peak season inventory digestion, channel pressure has been relieved, and attitudes are more moderate, accepting the current industry adjustment. Prices have slightly rebounded after hitting bottom, and the sentiment is slightly better than last year. From the perspective of liquor companies, they have learned from the experiences of the previous industry adjustment period, with major companies being more practical during this adjustment period, lowering targets and controlling inventory more strictly. They have also focused on developing mid to low-end products to meet current consumption trends, and have enhanced their sales strategies to connect more with consumers. Liquor companies operate more practically and steadily, and the "Matthew Effect" continues Maotai emphasizes the importance of stabilizing Feitian prices, achieving growth through non-standard placements, and deepening the packaging of Feitian in bulk for on-the-go consumption. Wuliangye Yibin is undergoing reforms with the dismantling of the Five Product Department and the establishment of a distributor platform company to quickly reach end-consumers. Laobaigan's sales have been better than last year with digital reforms gradually improving after the holidays, focusing on cost reduction and efficiency improvement, resolving channel profit sharing, and using consumer data to support offline marketing services. Fenjiu is in good operational condition, performing better than the broader market in multiple markets. The company continues to promote Fen Enjoy rewards, strengthen channel efforts, and with its four-drivers strategy, it ensures steady operation and enhances strategic capabilities. Sichuan Swellfun held a strategic conference emphasizing emotional connection with consumers, launching the "Sichuan Swellfun + First Alley" dual-brand operation, releasing high-end new products under First Alley, and operating channels with precision. Gujing is focusing on mid-range products with sales still growing, facing increased competition but maintaining competitive advantages. Jiangsu King's Luck Brewery Joint-Stock is seeing an increase in momentum within the province, with strong performance during the Spring Festival with V3, and is expanding nationwide after upgrading. Risk warning: Demand recovery is below expectations, wholesale prices for high-end liquor continue to decline, and there may be discrepancies between channel research and actual conditions.