Is the liquor industry a cyclical industry?

How long can the leading baijiu, Guizhou Maotai, remain a bull?

Strictly speaking, liquor belongs to the large consumer industry.

And the consumer industry, itself has cyclical properties.

But China's steady economic growth, coupled with a steady increase in the money supply, has made the entire consumer sector, which has not entered a counter-cycle in recent decades.

Combined with the liquor industry, high-end liquor market demand is strong, giving rise to Flying Moutai, Wuliangye, Guojiao 1573 and other high-end brands of hot sales.

In the market environment where supply exceeds demand, the down-cycle of liquor, from the current point of view, may continue for a long time.

So, from the point of view of Moutai's performance alone, can still maintain relatively stable growth.

But the performance of the slow bull, whether it can make Maotai continued out of the slow bull market, in fact, is open to question.

After all, Maotai's valuation is already at a relatively high level in history, and the pressure to digest the valuation is very strong, which hinders Maotai's upside.

Today from the performance growth logic and Maotai's stock rise logic, to talk about liquor and Maotai.

Why is Maotai's performance growing steadily?

We do not analyze the performance of Maotai from the general logic of the consumer industry, purely from the point of view of Maotai's own business and products, to talk about Maotai's performance.

Moutai's net profit margin, year-round, remains between 91-92%.

That means the actual cost, just over 8 percent, of a 1,500 bottle of Flying Moutai, which costs 120-130 yuan.

Moutai's net profit margin is 50-55 percent, meaning that more than half of the total sales price is pure profit.

The 35-40 percent in the middle is the distributor's profit.

This doesn't include the extra private markups some dealers make when demand exceeds supply.

Of course, all this only proves that Moutai is very profitable, laying the foundation for Moutai's performance and market capitalization, and doesn't tell us much about the substance of Moutai's steadily growing performance.

What has led to the steady growth in Moutai's performance is in fact a consumer market where demand exceeds supply.

We all know that Moutai, which leaves the factory at a normal price, is often out of stock in the market and can be said to be in short supply.

The vast majority of people buy Moutai at a markup.

This oversupply suggests two things.

1. Moutai's price hike has had very little impact on the market.

A large number of Moutai's price increase sales on the market, and the market acceptance is very high, which shows that the people who drink Moutai, for the price is not sensitive.

More recognition of Moutai comes from the quality and class of the wine.

In this case, Maotai itself has the space to increase prices, which is a great guarantee for profit margins.

Of course, Maotai itself price increases are subject to macro-control, and will not rise recklessly.

2, Maotai can grow its revenue performance as long as it concentrates on boosting its production capacity.

Moutai's oversupply, the direct manifestation of the second empty, is a goods hard to find.

So the performance of Maotai, and Maotai variables are closely related.

From a certain point of view, Moutai is more like a product of the planned economy, the supply of goods for suppliers, have strict standards.

It can be said that Maotai's production capacity and sales are controlled.

Again, Moutai's path to sustainable development.

Moutai's production in 2020 is 50,000 tons, more than 2,000 ping a ton, 100 million bottles of Maotai a year.

But actual sales were 34,300 tons, 15,700 tons less, or about 30 million bottles.

Moutai makes a move every year to keep the base wine, and this retention is for five years.

Moutai has always claimed this is for sustainable development, but it has had a huge impact on the market.

Capacity would not have been able to keep up with supply and demand, coupled with tunnels, plus dealer tunnels and speculation.

This sustainable development of the road, this part of the retained base wine price is even brought up.

Moutai can macro-control the amount of wine shipped to ensure their own performance, but also really in the so-called sustainable development road.

According to the current market situation, Maotai's production capacity, Maotai's sales strategy, a comprehensive judgment, the next 5-10 years, Maotai's performance growth, has almost nailed it.

What is the potential trend of Maotai's share price?

Moutai's share price is as high as its product Flying Moutai.

You say there's no water, there actually is, and you say there really is water, and it seems like there isn't.

Based on Moutai's performance, there are a few more core points that I can share with you.

1, Maotai never set people, making money is just a matter of time.

In fact, for all stocks with guaranteed performance, a record high share price is just a matter of time.

The stock price itself, is a reflection of performance.

It's just that money will give the stock price a range of volatility, perhaps twice as high as the low.

That is, the lowest price may be 50% of the highest price.

That is, the worst-case scenario for buying Moutai could be a backbreaker because of liquidity problems with the funds.

At 10% compound annual growth in Moutai's performance, the worst worst-case scenario is that it will be 4 1/2 years before it starts making money.

Of course, this is based on an assumption.

But for long term funds, it is because of this expectation that they will dare to take over Maotai at any high price.

Because Maotai does not trap people.

2, Maotai's reasonable valuation, should be rejudged.

Once upon a time, our valuation of the liquor industry, generally given about 30 times the price-earnings ratio, the low time is only about 20 times.

But as things stand now, liquor, led by Maotai Wuliangye, should qualify for a higher valuation level.

Perhaps some people will retort, feeling that the growth of liquor is not outstanding, and belongs to the traditional consumer industry, it is not worth giving such a high valuation.

The reality is that the high-end segment of the liquor, the certainty of performance, can not be replaced by other industries.

It is true that some of the technology field, Internet field, new energy field, the growth of the enterprise is better.

But those tracks also face huge challenges, accompanied by great uncertainty.

A technological revolution, or even just a patent, it is entirely possible that a technology company will go downhill, but not the white wine based on mass consumption, and even less so for the head.

So the stability of performance has given Moutai's shares the strongest possible support.

3, Maotai must be the core assets.

Really, the future of China's core assets, will not be concentrated in the large consumer category, must be manufacturing, is the technology technology and so on.

That is a clear direction of development.

But that doesn't affect Maotai as a core asset, with a certain premium.

The so-called core asset is a business that can keep on flowing, producing profits like a money-printing machine.

Moutai perfectly fits this criteria.

Many people say there are no luxury goods in China, and that almost all of them come from abroad.

From the point of view of our country's thousands of years of culture, how can high-end liquor not be a luxury?

Just because foreigners don't accept Chinese liquor now?

Chinese people accept foreigners' luxury goods, that is, the last decade or two, many things must be viewed in the light of development.

It's true that baijiu can't prosper the country, but that doesn't mean it can't be a core asset.

Likewise, it's like tobacco, not a good thing, but tobacco is also a core asset because the business makes money.

Capital markets, can make money business, there will be money to chase, more money, naturally, will produce a premium.

Moutai stood on 3000, 4000, 5000, I believe it is only a matter of time, as if the SSE index stood on 4000, 5000, 6000 is the same.

Time proves everything, and the stock price needs time to prove it.

One thing to remember.

Moutai's share price, has entered the second half from the first half, that is, the real meaning of the mad cow to slow bull.

As for whether to invest in Maotai now, itself is a matter of opinion, there is no need to do too much discussion.

On the cyclical industry

Many people actually do not understand the cyclical industry.

In fact, every industry is cyclical, which is an economic law.

Even the economy itself, there are cyclical laws.

Only the cycle is also divided into big cycle and small cycle, they are not the same.

The cycle of consumer stocks, the biggest natural enemy is economic development.

If economic development is bottlenecked, the market begins to deflation, people are no longer willing to spend money on consumption, then naturally the performance of the stock will decline significantly.

This is not really quite the same thing as other sectors, such as the cyclical concept stocks we often talk about.

Most cyclical industries, it is the price of raw materials and market supply that affects the production of a company.

When experiencing a double killing of rising raw material prices and downstream shipments, corporate profits are naturally severely squeezed.

When raw material prices fall, while the market demand is strong, corporate profits will naturally surge.

And the liquor market, including the pharmaceutical market, are relatively special, the market demand is relatively stable.

As long as the company holds the pricing power of the product, it can basically ensure the growth of performance, and will not be affected by too many other factors.

Like the production of liquor brewing industry, the cost of raw materials is extremely low, mainly dependent on the production process, the cyclical impact is even smaller.

As a class of luxury high-end liquor, and unlike ordinary wine, the market is in short supply, there is no need to worry about sales.

Plus the fact that Moutai itself can stock up on wine, directly through the industry cycle.

So, even in the cyclical industry of large consumption, the impact on Maotai is actually very small.

The scenario of Maotai wine has become its biggest barrier against cyclicality.

In fact, not many people understand Maotai.

There are a lot of people who would take the leading companies in every industry and make them all mao, which is actually wrong.

The characteristics of each industry are different, the investment approach is naturally not quite the same.

Growth enterprises have growth enterprise investment methods, unique barriers, stable growth enterprises have a set of investment methods, science and technology enterprises also have their unique investment methods.

Investors who are willing to hold on for the long term can consider stepping into stocks like Maotai in batches at relatively reasonable price ranges in pursuit of long-term stable returns.

For investors seeking higher returns, it may be worthwhile to look for companies that can disrupt the industry in tech maotai for higher returns.

M茅台's performance growth certainty is a double-edged sword, both advantages and disadvantages, to be viewed dialectically.