Zheshang Securities released a research report indicating that due to industry inventory remaining relatively high and an expected slight decline in sales during the Spring Festival period, with the impact of the 2025 "alcohol ban" gradually being digested, the industry's Q1 2026 collection progress is weaker than the same period last year. However, wholesale prices have overall maintained strong stability. As consumption gradually recovers, the decline in liquor sales during the Spring Festival has narrowed significantly. It is estimated that under a high base, sector performance in Q1 2026 will still face slight pressure, but 2026 may show a marginal improvement trend. A comprehensive turnaround to positive performance is anticipated in Q3 2026, aided by a lower base, highlighting the investment opportunity in the liquor sector at its current bottom range. The main views of Zheshang Securities are as follows:

Tracking Indicators: Core tracking indicators for liquor companies in Q1 2026 remain relatively weak, while prices stay stable. Influenced by high industry inventory and the expected slight sales dip during the Spring Festival, the industry's Q1 2026 collection progress lags behind last year, yet wholesale prices demonstrate strong overall stability.

Individual Stock Analysis: - Collections/Sales: During the Spring Festival, benefiting from rigid demand for gifting and banquets, especially for high-end liquor, Kweichow Moutai and Wuliangye led in sales, aiding their collection performance. Sales of Feitian Moutai increased by 10%-20% year-on-year, while Wuliangye's overall sales exceeded 20%. Simultaneously, strong performance in the mass-market segment priced around 100-200 RMB also supported collections for core products in this category, with sales accelerating in this mainstream price band. Based on this, it is estimated that the collection progress for Kweichow Moutai, Wuliangye, Jiugui Liquor, ZJLD, and Yingjia Gongjiu may be flat or slightly faster year-on-year. Regional liquor companies, affected by a high base and weaker sales, generally show slower collection progress compared to last year. - Wholesale Prices: Moutai's wholesale price rose significantly during the Spring Festival due to an expanding consumer base. Wuliangye's wholesale price saw a slight decline, but its enhanced cost-performance ratio benefited sales. Wholesale prices for other major products remained largely stable.

Earnings Outlook: Kweichow Moutai demonstrates strong earnings certainty, while most other liquor companies still face slight pressure. Overall, Q1 2026 industry earnings are expected to be generally under pressure but are already on a path of narrowing declines. Kweichow Moutai is projected to achieve high-quality, steady positive growth. Most other liquor companies are still in a phase of balance sheet clearance, laying the groundwork for medium-to-long-term development. - High-end liquor: Moutai stands out. It is expected that Kweichow Moutai will maintain positive growth in Q1 2026 following the implementation of marketing reforms. Wuliangye and Luzhou Laojiao may still see earnings declines in Q1 2026, with Luzhou Laojiao facing overall pressure despite actively managing shipments and prices for its high-end Gujiao product and positive performance in its mid-to-low range products. - Sub-premium liquor: Performance is clearly differentiated. Jiugui Liquor may see positive earnings growth benefiting from a low base and contributions from its Ziyou'ai product line. Shede Liquor's earnings are expected to remain stable due to smooth volume growth of its mid-to-low end products. Shuijingfang still faces earnings pressure despite stable pricing. ZJLD is expected to achieve positive growth in Q1 2026, aided by a low base and volume expansion from its Da Zhen model. - Regional leaders: Generally under pressure. Gujing Gongjiu and Jin Shiyuan are expected to see earnings declines in Q1 2026 due to a high base and relatively weak year-on-year sales, with their financial statements still undergoing clearance. Yingjia Gongjiu may achieve positive earnings, benefiting from active Spring Festival collections and sales for its Gong 6 and Gong 9 products in the 100-200 RMB price band.

Subsequent Outlook: Liquor companies' earnings are expected to see marginal improvements in 2026, presenting a favorable investment opportunity. Considering that the sector entered a period of deep sales adjustment starting in Q2 2025, followed by deep earnings adjustment in Q3 2025, and against the backdrop of gradual consumption recovery, the liquor sector's earnings are expected to improve quarter-by-quarter throughout 2026, with a sector-wide turnaround to positive performance anticipated in Q3 2026. The investment opportunity in the liquor sector at its bottom range remains favorable, with a continued primary recommendation for the strong alpha of Kweichow Moutai. Also noteworthy are companies with positive Spring Festival sales momentum like Wuliangye and Yingjia Gongjiu; those with strong beta attributes such as Luzhou LaoJiao and ZJLD; and other strong alpha names including Shanxi Xinghuacun Fenjiu, Gujing Gongjiu, and Jin Shiyuan.

Risks include slower-than-expected consumption recovery, food safety incidents, and policy changes.