The basic logic of investing in liquor

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No matter what other people think about the liquor industry , I have always regarded this industry as my base, constantly learning the basic knowledge of this industry, hoping to learn knowledge, make progress and gain success in the process. The liquor business is actually very simple. There are no complicated processes or various financial blind spots. The products are simple and the business is also very simple. It is relatively easy to study. , Liquor is actually inescapable, and it is also an excellent entry-level industry.

Liquor mainly has the following characteristics:

1. Liquor does not have an expiration date. Many products, such as fresh food or food, will have an expiration date. The sales pressure is very high. The inventory problem is like a sharp knife hanging over the head. There is no depreciation and accrual. After a few years, the price of new wine and old wine will have to increase a lot, which is simply hanging;

2. Liquor has strong bargaining power for upstream and downstream, especially for high-end liquor. Some downstream distributors basically pay first and then deliver goods, which is in an absolute dominant position. Most businesses will generate a large amount of accounts receivable, and there are countless IOUs. For a business, I think it is good to collect cash (such as selling pigs). The advance payment for liquor is too cruel and can take up a lot of funds from downstream dealers. . For the upstream, it is basically hanging and beating. Growers such as sorghum and wheat have no bargaining power in front of wine companies and can only passively accept them. Of course, the price of raw materials will fluctuate. However, most of the raw materials of liquor are food, and the price of food is Controlled, will not skyrocket;

3. Liquor companies have licenses (many people don’t know this), you can open a factory with 50 billion or 100 billion, and the state is unlikely to issue another license. This is in a sense. monopoly. Many people know that China Duty Free has a license to sell duty-free goods. In fact, liquor also needs a license. In addition, liquor companies, especially strong-flavor wine companies, need a lot of old cellars. For example, Wuliangye has a large number of cellars in Ming and Qing Dynasties. This does not mean that you just need to find a few pieces of land and dig a few pits. Microbial yeast The accumulation of history is essential, even if there is a new technology to make it, how can this history be rounded? Liquor needs a story.

4. Liquor does not need to continue to invest a lot of money in research and development to maintain its competitiveness. The capital is very small, and it is a core technology. Blending this thing depends on the taste buds of the masters, and it is impossible to learn it. This is biology Incomparable in the pharmaceutical and high-tech industries, in a word, stable;

5. The competition in the liquor industry is actually relatively small, and the groups and places it faces are different. Some are street barbecue stalls with empty bottles of wine, some are five-star hotels Feitian Moutai, Puwu, and the taste is different, and some are soy sauce. Some are strong fragrances, the consumption of people is differentiated, and there are even regional factors. For example, Yanghe is in Jiangsu, Fenjiu is in Shanxi, and Gujinggong is in Anhui. The competition between them is relatively benign, because the audience is always different;

6. Liquor has high gross profit margin, high net interest rate, and high ROE. These three highs cannot be maintained for a long time in other industries, at least they cannot be maintained with a small amount of reinvestment;

7. The debt ratio is low, there is a large amount of cash lying on the book, and the big wine companies have a lot of old wine stocks, with strong stability, and there are three thousand years of liquor culture blessing, not afraid of business bankruptcy and investment waste;

8. Liquor is addictive. Along with medical and cosmetic cosmetics, cigarettes, games, and health care products, I prefer to invest in the industry. The health care products industry is relatively chaotic (BY-HEALTH is currently relatively uneasy), and cigarettes are hardly listed. The rest of the company is liquor (basic base), medical beauty cosmetics (long-term attention to Amic, etc.), games (heavy warehouse Tencent).

Liquor is like this, with stable business and high profit margins, no need to reinvest to maintain the current profitability. The most ridiculous thing is that the products basically have no expiration date. Most of the liquors are more expensive the more they are released. Yes, it’s really a good business, and there is nothing to say about the best business model for A-shares.

We mainly track the following liquor companies, other liquors such as Shuijingfang, Jinshiyuan, Jiuguijiu, etc. If there is a good opportunity, we will not let go. There is a Shunxin Agriculture in the liquor. If we divest other businesses, only cattle will be left. Bar Mountain’s business, then I’ll put it into the table below.

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Research and attention do not mean to buy. Since Wuliangye was cleared at 272 yuan, it has recently bought back a little Yanghe observation warehouse at 149 per share.

Friends, smooth investment and happy family

$Wuliangye(SZ000858)$ $Yanghe (SZ002304)$ $Kweichow Moutai(SH600519)$

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