Swellfun and Mid-to-High-End Baijiu: Analysis of Spring Festival Restocking and Valuation Correction

Based on brokerage API data and the latest quarterly announcements, I provide the following revised and cautious views on Swellfun and mid-to-high-end baijiu’s Spring Festival restocking pull and valuation:

1. Assessment of “Performance Driven by Pre-Spring Festival Restocking Peak” (Need Cautious View)

• Recently, market expectations for the baijiu sector regarding “Spring Festival restocking + off-take recovery” have heated up. Brokerage API data shows that Swellfun has a 5-day gain of approximately +7.54%, and hit the daily limit during trading today, reflecting increased sentiment and speculation [0].
• However, from the latest financial report, Swellfun’s Q3 (as of 2025-10-31) performance was significantly below expectations: EPS was $0.46, significantly lower than the expected $1.46; revenue was $850 million, also much lower than the expected $1.65 billion (down about -68.8% and -48.6% respectively) [0]. This indicates that in the process of converting restocking into “financial report performance”, there are still multiple uncertainties and time lags such as off-take structure, channel payment rhythm, and inventory destocking. We cannot simply equate “restocking” with “performance already realized”.
• From seasonal experience, Spring Festival off-take is more concentrated in pre- and mid-festival business, banquet, and gift-giving scenarios, and its reflection in financial reports is usually lagging, manifested in current-period payments and shipments in subsequent quarters. Therefore, key attention should be paid to:

1. Off-take quality: Whether the structure of high-end and mid-to-high-end products is improving, and whether the off-take and price stability of core single products are stable;
2. Inventory and price: Channel inventory levels, whether wholesale prices have stabilized and rebounded—inventory health determines sustainability;
3. Channel payments: The transmission of advance receipts and payment rhythm to revenue confirmation in subsequent quarters;
4. Expenses and profits: If expenses are increased to promote off-take, it will affect the rhythm of current-period profit margin recovery.
   In summary, restocking is a necessary but not sufficient condition for performance growth. Confirmation of performance pull still needs to be combined with subsequent order and payment implementation, especially for the mid-to-high-end segment which has greater elasticity to business cycles.

2. Peer Comparison (Relatively Weak Fundamentals)

• ROE and profitability: Swellfun’s TTM ROE is approximately 10.6%, significantly lower than the industry average of about 26.5%; net profit margin is about 14.4%, only about 40% of the peer average (36.5%) [0]. This reflects its relative disadvantage in the mid-to-high-end segment from the perspective of shareholder returns and profit quality.
• Valuation level: P/E is about 34.9x, significantly higher than the industry average of about 14.8x [0]. Against the background of the latest quarterly performance miss and off-take not yet fully reflected in financial reports, the current valuation has already given a high premium to the “improvement expectation”.
• Annual performance: YTD decline is about -22.6%, larger than the industry average of about -7.1% [0]. This indicates that the market was cautious about its fundamentals and expectation fulfillment earlier, and the current “recovery/restocking” trading is more from sentiment and speculation rather than a confirmed performance inflection point.

3. Valuation from DCF Perspective (Implies High Dependence on High Growth Realization)

• DCF neutral scenario assumptions: Approximately 14.8% revenue growth rate, about 35.1% EBITDA margin, WACC of about 10.1%, corresponding to a fair value of about $94.8, which still has upside potential relative to the current price [0]. However, the rationality of this valuation is highly dependent on:

1. Revenue growth and profit margins can quickly recover to historical centers;
2. Channel off-take can be smoothly transmitted to financial reports, and inventory and expense structures improve;
3. Mid-to-high-end demand resilience can continue. Considering the magnitude of the latest quarterly performance miss, the realization of the above assumptions is uncertain.

4. Technical Position and Trading Signals

• Technical analysis shows that it is currently in “sideways consolidation/no clear trend”, with support at about $37.9 and resistance at about $39.6 [0]. The recent 5-day rise has strong short-term speculative attributes. Before effectively breaking through the resistance level with volume, the sustainability of the upward trend needs to be viewed cautiously.

5. Risks and Focus Points

1. Uncertainty in transmission from off-take to performance: The mid-to-high-end channel structure and inventory pressure are relatively greater. If the off-take structure is biased towards mid-low end and wholesale prices are under pressure, the slope of profit recovery will be limited.
2. Inventory and price: If volume is exchanged for price under high inventory, it will affect profit margins, and weak wholesale prices will weaken channel confidence and future replenishment willingness.
3. Expense investment and profit recovery rhythm: Increasing expenses in the short term to stabilize off-take will suppress the extent of profit margin recovery.
4. Industry demand and competition pattern: The recovery rhythm of macroeconomics and consumption scenarios, and the risk of high-end liquor squeezing mid-to-high-end market share still need to be tracked.

6. Conclusion and Recommendations (More Cautious)

• On performance pull: Pre-Spring Festival restocking has a pulling effect on mid-to-high-end products, but from the magnitude of Swellfun’s latest quarterly performance miss, it has not been fully reflected in the financial reports. More attention should be paid to post-festival off-take quality, inventory health, payments, and the rhythm of Q1/Q2 performance fulfillment.
• On valuation judgment: The current P/E of about 34.9x is at a high level in the mid-to-high-end segment. Compared with peers, it has already incorporated a high improvement expectation. If subsequent off-take transmission is not smooth or performance misses occur again, there is a risk of valuation correction; although DCF shows upside potential in the neutral scenario, it is highly dependent on high growth and profit margin recovery assumptions.
• Allocation recommendations: Short-term trading attributes are strong; keep close track of post-festival off-take data and channel feedback. Medium-term allocation needs to wait for clearer signals of “financial report improvement + healthy inventory + stable price”. Focus on Q1 preview/performance guidance, channel research, and high-frequency data on off-take/wholesale prices.

Key Charts:

• Financial comparison charts clearly show Swellfun’s structural weaknesses in profitability and valuation (high P/E, low ROE/profit margin) [0].
• Technical charts indicate that the current position is in a sideways range; upward movement requires effective breakthrough with volume [0].

References
[0] Jinling API Data (including real-time quotes, company overview, financial analysis, DCF valuation, technical analysis)