中国白酒：仅到家庭主导消费的一半

1、 cGlobalResearch15 February2019China Baijiu SectorUBSEvidenceLabinside:onlyhalfwayto household-ledconsumptionPositive read-through for household demand for higher-end baijiuWe leverage a UBS Evidence Lab China Premium Alcohol Demand Survey covering about 1,000 affluent alcohol consumers in first- an

2、d second-tier cities to gauge householdspurchasingpowerandbuyingbehaviourinhigher-endbaijiu.Thesurveys tenthbi-annualiteration(December2018)suggestedcontinuedrobustdemandforand premiumisationtowardshigher-endbaijiubyhouseholdsinthepast/nextsixmonthson stable income growth. But the sectors value grow

3、th has been moderating, due to the impact of the weaker economy on business-related consumption. The survey results addtoourconfidencethat:1)household-ledpremiumisationcouldbolstersectorvalue growth in the short term; and 2) the sector is only halfway towards household-led consumption in the longer

4、term. We therefore believe long-term value is emerging in leadingbaijiuplayers,as2019EPEhastrendeddownto18-24xonlingeringconcerns about higher-end baijius cyclicality, which we consideroverdone.UBS proprietary model suggests a 10%+ value CAGR for higher-end baijiuUBS proprietary baijiu model suggest

5、s 2018-21E value CAGRs of 10%/14% in the premium/high-end segments, with 2019 likely a year of negative (retail) price growth after multiple years of recovery since 2015. Resilient value growth in the higher-end segment could be backed by households continuing to trade up, given affluent consumersin

6、comegrowthislessaffectedbytheslowingeconomy,theirrisinghealth consciousness, and the still-low penetration rate of higher-end baijiu. Meanwhile, leadingbaijiuplayersmorerationalpricingstrategiesandhealthierchannelinventories reduce the possibility of sell-in volatility like that in 2013-14. In 2019,

7、 premium baijiu could have higher earnings growth visibility than high-endbaijiu.Baijiu market could brew more national brands over the next decadeWith higher-end baijius consumption structure shifting towards households, leading baijiuplayershaveunveiledstrategiestobecomenationalbrandssince2016-17.

8、They arebasedonbuildingandoptimisingroutes-to-marketnationwideandinvestingmore in brand equity and consumer cultivation. We expect major brands to enter a stageof steady,structuralgrowthinthenextdecade,andcontinuetogainmarketshare.Cyclical impacts on share prices; long-term value emergingOrder of pr

9、eference based on risk-reward: HYPERLINK /shared/d2aLV2WAWEYi Wuliangye, HYPERLINK /shared/d2kBJDh45Zh Laojiao, HYPERLINK /shared/d29FqMNipqMf Moutai, HYPERLINK /shared/d2yTZwBvVNLQbH Yanghe and HYPERLINK /shared/d2WSktPWDrxTU Swellfun.Distillers & BrewersChinaEquitiesBrad ChenDistillers & BrewersCh

10、inaEquities HYPERLINK mailto:brad-a.chen brad-a.chen+86-213-8668985Frank HYPERLINK mailto:frank.su +86-213-8668811Figure 1: Summary valuationsShare pricePrice targetMarketcap PE(x) EV/EBITDA(x) NetmarketDividend yield EPS CAGRROIC (post tax) (%) (Rmb)Rating(Rmb)(Rmb bn)2019E2020E2019E2020E2019E2019E

11、2018-20E2019E2020EWuliangye67.96Buy69.6026417.915.810.89.221%3.612.8120176Luzhou Laojiao48.86Buy54.207218.115.711.69.713%4.015.86367Kweichow Moutai737.16Buy769.0092623.720.015.813.011%2.217.7121134Yanghe109.34Buy133.9016517.615.411.59.912%3.914.57081Swellfun35.42Neutral32.001725.722.718.916.34%1.612

12、.54941Above data as of 14 February 2019. Source: Company data, UBS-S estimates HYPERLINK / This report has been prepared by UBS Securities Co. Limited.ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ONPAGE31. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investor

13、sshouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.China Baijiu SectorResearch THESIS MAPa guide to our thinking and whats where inthis repor

14、t HYPERLINK l _bookmark2 OURTHESISINPICTURESMOSTFAVOREDLEAST FAVOREDWuliangye Yibin, Luzhou Laojiao, Kweichow Moutai, Jiangsu YangheSichuan SwellfunPIVOTALQUESTIONSQ: Can rising household consumption bolster demand for higher-end baijiu in 2019-21 with the weaker economy impacting business-relatedco

15、nsumption?Yes. We believe the continued demand for and towards bybyUBSEvidenceLabcouldsustainvaluegrowth in the From a angle, we think baijiu is only towards(volumeshareofabout50%now).Majorhavealsochannelandpricingwellintheshorttermintothesoftened WevalueCAGRsof10%/14%inthethough at has been HYPERLI

16、NK l _bookmark3 Q: Can major brands continue to gain market share through regional expansion?Yes,thankstoconsumersupgradingneeds,strongerbrandrecognitionandgreaterassociationof higher prices with better quality. Meanwhile, leading players are investing more in brands and routestomarket,andhavestream

17、linedtheirproductlinesinresponsetotheshiftingconsumption structure. They may also pursue M&As. We believe all the players we cover with strong brands, high-qualityproducts,extensivedistributionnetworks,effectivestrategies,goodexecution,and/or ffcet cahare key to ecme atal ayers (tai s areay a atal a

18、). HYPERLINK /shared/d2WvBsRlPNSzcu4 Ca au ect: US ve a: Can te Ca aet s re aal as UBS-SVIEWHigher-end baijiu could be halfway to household-led consumption, and the reshaping demand- supplyenvironmentcouldlowerthecyclicalitythathascausedinvestorsconcernoverlyso,inour vwas te emy weaken.EVIDENCEThete

19、nthUBSEvidenceLabChinaPremiumAlcoholDemandSurveyshowed:1)respondentsbaijiu nn/tok n te at/ext x ms tayed ve; )voe” as a rean fr dmoreonbaijiustayedresilientforbothself-consumptionandgifting;3)almosteverybaijiuproduct had higher penetration in non-business occasions/self-consumption than business occ

20、asions/gifting; and4)consumersincomeoutlookstayedpositive,withcyclicaldriversrankinglow.WHATSPRICEDIN?2019EPEforthecompaniesunderourcoveragehascorrectedfrom20-40 xinJune2018to18-26x, below the global peer average (except for Swellfun). UBS residual income model also implies investorsarefactoringinmu

21、chlessvalueforlong-termgrowth. HYPERLINK l _bookmark4 moreUBS-S proprietary model suggests the premiumisation of baijiu could continue in 2019-21E, though at a slower paceB a ijiu growth by price band2012201320142015201620172018E2019E2020E2021E2012-15CAGR2015-17CAGR2017-21ECAGRR e tail sales volum e

22、 growthDown-cycle:goverend/premium nm entspendingmentsalmostg in high-clearedR ecoveryperiodNew stable grto beowth preiod: driven by housigh-end/premium seholdconsumptionegm entsTotal7. 7%6. 8%1. 3%3. 9%1. 6%0. 9%0. 6%-2. 0%-1. 9%-1. 9%4. 0%1. 2%-1. 3%Low-end ( R m b500/ 500m l)22.2%-14.3%-6.4%10.3%

23、20.0%10.0%15.0%12.0%9.0%8.5%-4.0%14.9%11.1%R e tail sales revenue growthTotal12. 8%-3. 9%-4. 9%6. 8%7. 4%9. 0%8. 7%1. 9%3. 8%4. 0%-0. 8%8. 2%4. 6%Low-end ( R m b500/ 500m l)22.0%-37.8%-30.3%5.5%35.0%48.5%32.3%7.5%12.3%11.8%-23.0%41.6%15.6%R etail ASP growthTotal4. 7%-10. 0%-6. 2%2. 8%5. 8%8. 0%8. 1%

24、3. 9%5. 8%6. 0%-4. 6%6. 9%5. 9%Low-end ( R m b500/ 500m l)-0.2%-27.4%-25.5%-4.4%12.5%35.0%15.0%-4.0%3.0%3.0%-19.7%23.2%4.0%Source: Euromonitor, National Bureau of Statistics of China, UBS-S estimatesChina Baijiu SectorUBS-S ResearchOURTHESISINPICTURES HYPERLINK l _bookmark0 return 100%80%60%28%40%28

25、%20%0%Premium/high-end bajiu consumption structure50%50%2%51%47%2%50%50%2%51%47%2%30%68%2%38%60%2%20%Premium/high-end baijiu consumption has become household-driven, with government-related consumption insignificant and business-related likely to lose share. Channel inventories are healthy, and lead

26、ing players have more effective strategies and greater risk awareness. Baijiu has also become much less cyclical.2%20%22%22%28%78%Premium baijiu22%22%28%78%High-end baijiuPremium baijiuHigh-end baijiuPremium baijiuHigh-end baijiu20122017HouseholdBusinessGovernmentReasons respondents cited for drinki

27、ng less baijiu (past 12 months)201720180%20%40%60%80% 20172018More health conscious nowExperimenting other alcoholicbeveragesMyfamily/friendsdrinkthislessthanbefore Other alcoholic beverages offer more brands/ varieties (e.g. flavor, strength) nowIamboreddrinkingthisThebrandsIdrinkarelessaffordablen

28、ow DontprefertobeseendrinkingthisanymoreMyincomehasdeclined ImgoingouttobarsorrestaurantslessoftenConsumers rising health concerns could drive them to drink premium baijiu, as they associate a higher price with higher quality, as per UBS Evidence Labs China Alcoholic Beverages Consumption Survey.454

29、0353025201510520090200970%60%50%40%30%20%10%0%No. of Chinas high-income householdsm40.036.032.328.825.522.619.810.8 12.915.1 2010201120122013201420152016201720182019F2020F%ofrespondentsnotinganincreaseinbaijiu spendingoverm40.036.032.328.825.522.619.810.8 12.915.1 20102011201220132014201520162017201

30、82019F2020FSteadily growing household income could be a structural growth driver for baijius secular premiumisation.2021FIn UBS Evidence Labs China Premium Alcohol Demand survey, the percentage of respondents who have increased/will increase spending on baijiu in the prior/next six months rose 10ppt

31、/9ppt to historical highs.2021FJuly-14Jan-15July-15Jan-16July-16Jan-17Oct-17Jan-18July-18Dec-18Spending moreinP6MSpending more in N6MJuly-14Jan-15July-15Jan-16July-16Jan-17Oct-17Jan-18July-18Dec-1860%Reasons cited by respondents for spending more on baijiu over the past 6 months - Self consumption50

32、%40%30%20%10%0%Jan-15 July-15 Jan-16 July-16 Jan-17 Oct-17 Jan-18 July-18 Dec-18PremiumizationVolumePriceChannelshiftFrequencyFor self-consumption, “volume” rose as a reason cited for spending more in 2018 (the July and December 2018 surveys), while premiumisation remained relatively low and “price”

33、 continued to slide, demonstrating households resilient demand but some price sensitivity.Major baijiu products penetration: business vs. non-business occasions(December 2018)Regular Feitian Luzhou Lao JiaoGuojiao1573 JiannanchunShuijingjian Gujing Nianfenyuanjiang YangheBlueofDream RegularWuliangye

34、YangheBlueofYangheBlueofShanxi FenjiuQinghuaLang JingHongxing LaobaiganLiquorBusinessoccasionsNon-business occasions0%20%40%60%80%All baijiu products included in the survey (except Moutai), had a higher penetration in non-business occasions/self-consumption than in business occasions/gifting.Income

35、drivers for respondents to have spent/spend more0%20%40%60%Increaseinsalary,bonusorsubsidizationfrom employerIncrease in investment on financial productsIncreaseincome from savingsIncrease in currently-owned property value Increase in income from running business/part-time jobsIncrease income from l

36、etting property Increase in other investments Increase in allowance from othersIncomedriverswho spent more on Baijiu inP6MIncomedriverswho will spend more on Baijiu inN6MMajor income drivers among those who spent/will spend more on baijiu in the past/next six months were increases in “salaries, bonu

37、ses or subsidies from employers“ and “investments on financial products” rather than “currently-owned property values”.9%13%13%41%55%43%52%6%32%48%9%13%13%41%55%43%52%6%32%48%UBS Residual Income Model39%100%39%80%12%60%12%10%10%40%20%29%29%8%20%UBS residual income analysis suggests that, based on cu

38、rrent share prices, the shares of value attributed to the long-term growth of leading baijiu players have substantially decreased since June 2018.8%20%65%5%30%37%42%8%44%42%51%49%13%58%59%67%65%5%30%37%42%8%44%42%51%49%13%58%59%67%Feb-19 Jun-18 Feb-19 Jun-18 Feb-19 Jun-18 Feb-19 Jun-18 Feb-19 Jun-18

39、Kweichow MoutaiWuliangyeYangheLuzhou Laojiao SwellfunSources for exhibits above: Company data, Euromonitor, National Bureau of Statistics, UBS Evidence Lab, UBS-S estimatesChina Baijiu SectorUBS-S ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark1 return Q: Can rising household consumption bolster dema

40、nd for higher-end baijiu in 2019-21 with the weaker economy impacting business- related consumption?UBS-S VIEWYes.Webelievethecontinuedhealthydemandforandconsumptionupgrade towards higher-end baijiu1 by households suggested by UBS Evidence Lab surveyresultscouldsustain(retail)valuegrowthinthehigher-

41、endsegment. From a long-term angle, we think higher-end baijiu is probably only halfway towards household-led consumption (volume market share of about 50% now).Majorbrandshavealsomanagedchannelinventoryandpricingwellin the short term in response to the softened demand. We expect 2018-21 (retail) va

42、lue CAGRs of 10%/14% in the premium/high-end segments, though worsening profitability at many businesses has been negatively impacting business-relatedconsumption.EVIDENCEAccording to UBS Evidence Labs China Premium Alcohol Demand surveys:IntheDecember2018wave,thepercentagesofrespondentswhohave incr

43、eased/wouldincreasespendingonbaijiuintheprior/nextsixmonths rose10ppt/9ppttohistoricalhighs,withaveragemonthlybaijiuspending also reaching a new high.Among reasons for spending more on baijiu, the “volume” factor remained resilient for both self-consumption and gifting in2018.All 15 baijiu products

44、included in the survey (except Moutai), had a higher penetration in non-business occasions/self-consumption than in businessoccasions/gifting.Fromanincomeperspective:a)thepercentageofrespondentsexpecting household income to increase over the next 12 months was 73% in the December survey versus 74% i

45、n July; b) generally respondents baijiu spending was positively related to change in household income; and c) relativelystableincomedriversrankedhigherthancyclicalones.WHATS PRICED IN?Webelievemanydomesticinvestorshavebeenunderestimatinghigher-end baijius long-term growth potential from household se

46、cular consumption upgrades and have turned pessimistic due to slowing value growth in the short term amid a weaker economy.1 We divide the China baijiu sector into four segments according to product retail prices in thisreport(unlessotherwisestated):1)premium(retailprices:Rmb500/500ml);2)high-end (r

47、etail prices: Rmb300-500/500ml); 3) mid-range (retail prices: Rmb100-300/500ml); and4)low-end(retailprices: 6% above the MRA.49%26%NeutralFSR is between -6% and 6% of the MRA.38%23%SellFSR is 6% below the MRA.14%14%Short-Term RatingDefinitionCoverage3IB Services4BuyStockpriceexpectedtorisewithinthre

48、emonthsfromthetime theratingwasassignedbecauseofaspecificcatalystorevent.1%1%SellStockpriceexpectedtofallwithinthreemonthsfromthetime theratingwasassignedbecauseofaspecificcatalystorevent.1%1%Source: UBS. Rating allocations are as of 31 December 2018.1:Percentage of companies under coverage globally

49、 within the 12-month rating category.2:Percentageofcompanieswithinthe12-monthratingcategoryforwhichinvestmentbanking(IB)serviceswereprovided within the past 12 months.3:Percentage of companies under coverage globally within the Short-Term rating category.4:PercentageofcompanieswithintheShort-Termrat

50、ingcategoryforwhichinvestmentbanking(IB)serviceswereprovided within the past 12 months.KEYDEFINITIONS:ForecastStockReturn(FSR)isdefinedasexpectedpercentagepriceappreciationplusgrossdividend yieldoverthenext12months.Insomecases,thisyieldmaybebasedonaccrueddividends.MarketReturnAssumption (MRA) is def

51、ined as the one-year local market interest rate plus 5% (a proxy for, and not a forecast of, the equity risk premium).UnderReview(UR)StocksmaybeflaggedasURbytheanalyst,indicatingthatthestockspricetargetand/or ratingaresubjecttopossiblechangeinthenearterm,usuallyinresponsetoaneventthatmayaffecttheinv

52、estmentcase orvaluation.Short-TermRatingsreflecttheexpectednear-term(uptothreemonths)performanceofthestockanddonot reflect any change in the fundamental view or investment case. Equity Price Targets have an investment horizon of 12 months.EXCEPTIONS AND SPECIAL CASES:UK and European Investment Fund

53、ratings and definitions are: Buy: Positive on factors such as structure, management, performance record, discount; Neutral: Neutral on factors such as structure, management,performancerecord,discount;Sell:Negativeonfactorssuchasstructure,management,performancerecord, discount. Core Banding Exception

54、s (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment ReviewCommittee(IRC).FactorsconsideredbytheIRCincludethestocksvolatilityandthecreditspreadoftherespective companys debt. As a result, stocks deemed to be very high or low risk may be subject to higher or lower bands as

55、they relate to the rating. When such exceptions apply, they will be identified in the Company Disclosures table in the relevant research piece.Research analysts contributing to this report who are employed by any non-US affiliate of UBS Securities LLC are not registered/qualifiedasresearchanalystswi

56、thFINRA.SuchanalystsmaynotbeassociatedpersonsofUBSSecuritiesLLCand therefore are not subject to the FINRA restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. The name of each affiliate and analyst employed by that affi

57、liate contributing to this report, if any, follows.UBS Securities Co. Limited: Brad Chen; Frank Su.Company DisclosuresCompany NameReuters12-month ratingShort-term ratingPricePrice dateJiangsu Yanghe Brewery002304.SZBuyN/ARmb109.3414 Feb 2019Kweichow Moutai600519.SSBuyN/ARmb737.1614 Feb 2019Luzhou La

58、ojiao000568.SZBuyN/ARmb48.8614 Feb 2019Sichuan Swellfun600779.SSNeutralN/ARmb35.4214 Feb 2019Wuliangye Yibin000858.SZBuyN/ARmb67.9614 Feb 2019Source: UBS. All prices as of local market close.Ratingsinthistablearethemostcurrentpublishedratingspriortothisreport.Theymaybemorerecentthanthestock pricing

59、dateUnlessotherwiseindicated,pleaserefertotheValuationandRisksectionswithinthebodyofthisreport.Foracompleteset ofdisclosurestatementsassociatedwiththecompaniesdiscussedinthisreport,includinginformationonvaluationandrisk, pleasecontactUBSSecuritiesLLC,1285AvenueofAmericas,NewYork,NY10019,USA,Attentio

60、n:InvestmentResearch.Jiangsu Yanghe Brewery (Rmb)PriceTarget(Rmb)Stock Price(Rmb)5001-Feb-1601-Apr-1601-Jun-1601-Aug-1601-Feb-1701-Apr-1701-Jun-1701-Aug-1701-Feb-1801-Apr-1801-Jun-1801-Aug-1801-Feb-1901-Feb-1601-Apr-1601-Jun-1601-Aug-1601-Feb-1701-Apr-1701-Jun-1701-Aug-1701-Feb-1801-Apr-1801-Jun-180