China Food & Beverages Industry：Liquor sector cheering up since Aug 09
By 2009-9-11 9:56:07
Event:On 7 Sep 09, listed liquor producers rallied as a whole in the Mainland stock market.
Comment: Bottoms up for restaurant goer. Restaurant consumption of liquor (measured by the number of bottlesopened in restaurants) has increased significantly since Aug 09. To illustrate, in the restaurants we follow inBeijing, liquor consumption rose 20%-plus mom. A total of 9,000 bottles of ‘National Cellar-1573’ – atop-of-the-line product by Luzhou Laojiao Liquor Factory – were sold in Beijing restaurants during Aug 09, up 13%from about 8,000 bottles in Jul 09. The growth momentum has carried forward into Sep 09. We estimate that morethan 10,000 bottles of liquor will be ordered by patrons to these restaurants in the Mainland capital.
In terms of supply, there is a moderate shortfall in high-end liquors at present. Our recent field study to WuliangyeGroup, Sichuan province, revealed that the distiller is not able to fully satisfy market demand for its Wuliangyeseries. Bottles of 39% vol have already sold out. Instead of getting their purchases from the warehouse,distributors now literally wait by the packaging line to upload the 52% vol variety.
Raising their spirits from the pessimistic lows of early 2009, liquor distributors are thirsty for the drink and payingup in an equally eager manner.
In short, the business climate for the liquor industry has warmed considerably since Aug 09. We expect sales tosurge further in the run-up to the holiday week covering National Day and Mid-Autumn Festival.
?? Prices to rise. Leading liquor producers are not likely to raise prices immediately, given the government stanceagainst it as made clear in a recent article on the State Administration of Taxation website, titled ‘Re-assessmentOf Tax-included Prices Should Not Be Taken As An Excuse For Raising Liquor Prices’). However, with growingdemand, the gap between ex-factory prices and retail prices has been widening insistently. As such, a priceincrease by liquor producers should be inevitable, and we expect it to happen before end-09E. We forecast thefollowing increases in ex-factory prices: (i) an Rmb80 (~18%) increase for 53% vol Kweichow Moutai, toRmb519/bottle; (ii) an Rmb40 (~70%) increase for 52% vol Wuliangye, to Rmb509/bottle; and (iii) an Rmb40(~7%) increase for 52% vol National Cellar-1573, to Rmb508/bottle.
?? Alcohol restriction to suppress sales. The on-going nationwide campaign against drunk driving andcomprehensive program to improve public security should have a considerable adverse impact on the liquorsector.
?? Reiterate our OUTPERFORM rating on recovering business and recuperating valuations. Webelieve the peak season for consumption (3Q09E) will accelerate the sector recovery going forward. Theadjustment of excise tax on liquor should not dampen sales, nor will it alter the sector’s long-term growth trend.
Constrained by relevant policies, producers are holding off on price increases for the time being, but we see pricehikes as inevitable in the mid-to-long term. We maintain our OUTPERFORM rating on the liquor segment.
Kweichow Moutai and Luzhou Laojiao remain our favorites among leading distilleries. For second-tier players, wesuggest focusing on Shanxi Xinghuacun Fen Wine Factory, Golden Seed Winery and Gujing Distillery. We alsorecommend following Jiugui Liquor and Laobaigan Liquor for their recovery potential.
Comment: Bottoms up for restaurant goer. Restaurant consumption of liquor (measured by the number of bottlesopened in restaurants) has increased significantly since Aug 09. To illustrate, in the restaurants we follow inBeijing, liquor consumption rose 20%-plus mom. A total of 9,000 bottles of ‘National Cellar-1573’ – atop-of-the-line product by Luzhou Laojiao Liquor Factory – were sold in Beijing restaurants during Aug 09, up 13%from about 8,000 bottles in Jul 09. The growth momentum has carried forward into Sep 09. We estimate that morethan 10,000 bottles of liquor will be ordered by patrons to these restaurants in the Mainland capital.
In terms of supply, there is a moderate shortfall in high-end liquors at present. Our recent field study to WuliangyeGroup, Sichuan province, revealed that the distiller is not able to fully satisfy market demand for its Wuliangyeseries. Bottles of 39% vol have already sold out. Instead of getting their purchases from the warehouse,distributors now literally wait by the packaging line to upload the 52% vol variety.
Raising their spirits from the pessimistic lows of early 2009, liquor distributors are thirsty for the drink and payingup in an equally eager manner.
In short, the business climate for the liquor industry has warmed considerably since Aug 09. We expect sales tosurge further in the run-up to the holiday week covering National Day and Mid-Autumn Festival.
?? Prices to rise. Leading liquor producers are not likely to raise prices immediately, given the government stanceagainst it as made clear in a recent article on the State Administration of Taxation website, titled ‘Re-assessmentOf Tax-included Prices Should Not Be Taken As An Excuse For Raising Liquor Prices’). However, with growingdemand, the gap between ex-factory prices and retail prices has been widening insistently. As such, a priceincrease by liquor producers should be inevitable, and we expect it to happen before end-09E. We forecast thefollowing increases in ex-factory prices: (i) an Rmb80 (~18%) increase for 53% vol Kweichow Moutai, toRmb519/bottle; (ii) an Rmb40 (~70%) increase for 52% vol Wuliangye, to Rmb509/bottle; and (iii) an Rmb40(~7%) increase for 52% vol National Cellar-1573, to Rmb508/bottle.
?? Alcohol restriction to suppress sales. The on-going nationwide campaign against drunk driving andcomprehensive program to improve public security should have a considerable adverse impact on the liquorsector.
?? Reiterate our OUTPERFORM rating on recovering business and recuperating valuations. Webelieve the peak season for consumption (3Q09E) will accelerate the sector recovery going forward. Theadjustment of excise tax on liquor should not dampen sales, nor will it alter the sector’s long-term growth trend.
Constrained by relevant policies, producers are holding off on price increases for the time being, but we see pricehikes as inevitable in the mid-to-long term. We maintain our OUTPERFORM rating on the liquor segment.
Kweichow Moutai and Luzhou Laojiao remain our favorites among leading distilleries. For second-tier players, wesuggest focusing on Shanxi Xinghuacun Fen Wine Factory, Golden Seed Winery and Gujing Distillery. We alsorecommend following Jiugui Liquor and Laobaigan Liquor for their recovery potential.
From finance.qq.com