Company Reports

Chinese baijiu sales have deteriorated since the second half of 2024, and the sector has lagged the broader market. An aging population and falling per capita drinking rates point to a shrinking pool of buyers, prompting us to reassess competitive strength across our coverage.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market by revenue. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with a suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Wuliangye's second-quarter revenue declined 13% year-on-year. However, core operating performance, after excluding taxes and surcharges, decelerated sharply by 51%.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market by revenue. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with a suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

A significant change in accounting policy prompted Wuliangye to restate its 2025 financials, resulting in a steep drop in revenue and net profit. Against this lower base, first-quarter 2026 revenue and net profit rebounded, surging 34% and 83% year over year, respectively.

Despite continued sectorwide demand weakness, our recent channel checks indicate steady sales volume for leading baijiu brands during the Lunar New Year period, with lower inventory levels compared with a year ago.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market by revenue. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with a suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Our channel checks continue to indicate persistent weakness in baijiu demand, with the sector facing double-digit revenue declines ahead of the Lunar New Year holiday. However, performance varies across segments—premium baijiu, led by Moutai, is showing signs of modest demand improvement.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Wuliangye's third-quarter performance weakened significantly, with revenue falling 53% year on year and net profit plunging 66%, marking the steepest decline since its 1998 listing. That said, the firm declared an interim dividend of CNY 10 billion, underscoring its focus on shareholder returns.

Our channel checks continue to indicate persistent weakness in China's consumer sentiment and elevated inventory levels for Baijiu. Golden Week sales for the sector declined by 20%-30% year on year, and inventory levels have increased by about one month.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Wuliangye's second-quarter growth decelerated, with revenue rising just 0.1% year on year and net profit falling 7.6%. Persistent macroeconomic challenges and the newly implemented alcohol ban measures have intensified demand pressure across the broader baijiu sector.

Wuliangye posted a year-on-year revenue and net profit growth of 7% and 5%, respectively, in 2024, followed by 6% increases in both revenue and net profit for the first quarter of 2025. Its 2024 dividend was CNY 5.75 per share, aligning with its 70% payout ratio commitment.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Amid China's macroeconomic and consumption headwinds, our baijiu coverage trailed the broader market in 2024, falling 19% on average, compared with a 13% rise in the Shanghai Composite Index.

Near-term headwinds in the macroeconomy have weakened baijiu demand and the sector’s profitability, with slower year-over-year sales growth across all segments in the third quarter versus the previous quarter. We expect the cyclical weakness to persist in the next 1-2 quarters, and we remain selective, with a preference on premium and leading brands given their relatively resilient demand.

Wuliangye Yibin is the second-largest distiller in the premium Chinese baijiu market. Its core product, flagship 52-degree Wuliangye, is widely known as the best strong-aroma liquor, which is a type of distilled liquor that is sweet-tasting, smooth in texture, and mellow, with a gentle, lasting fragrance. The liquor is produced in a unique natural ecological environment, with suitable climate and microbial environment for fermentation. Its premium quality and over 650 years of history have given the company strong pricing power, reflected in its superior profitability and returns on invested capital among its peers.

Wide-moat Wuliangye’s solid second-quarter results reaffirmed resilient demand for premium baijiu, despite weak macroenvironments and still-sluggish consumer sentiment. The 10.1% year-over-year revenue growth and 11.5% rise in net profit were largely consistent with its first-quarter performance, and in line with our expectations. In addition, cash flows remain robust, with cash received from product sales in the first half rising 15.3% from a year ago and advanced payment as of end-June increasing sharply to CNY 8.2 billion, up from CNY 3.1 billion from a quarter ago, indicating solid earnings quality.

China is set to start a new round of consumption tax reform, which aims to transform centralized taxation to a hybrid tax system shared by central and local governments. The reform may also involve broadening the tax base and shifting collection points to wholesale and retail markets from production lines. Although details about the reform remains scant in the near term, we think the impact on baijiu distillers should be limited. In particular, we believe leading premium baijiu brands are better positioned in the long term as their unparalleled brand strength and premium product quality should translate into strong pricing power, allowing them to mitigate cost inflation through price hikes. As such, Wuliangye and Laojiao remain our preferred picks in China‘s baijiu sector.