CITIC SEC released a research report stating that the baijiu sector has underperformed the broader market since 2025 due to weak fundamentals. However, with most listed liquor companies gradually clearing inventories, the firm believes the second half of 2025 marks the cyclical bottom for the industry, anticipating stabilization and recovery in 2026 amid clearer demand recovery trends. The report highlights attractive bottom-fishing opportunities in baijiu.

For beer, CITIC SEC expects flat to slightly declining revenue and profits in 2026, citing challenges such as rising off-premise consumption, fragmented consumer demand, and sluggish consumption recovery. The firm favors beer companies with strong market share growth, efficient channel management, and competitive product portfolios.

Key points: 1. Baijiu Sector: - Since 2025, baijiu stocks have significantly underperformed indices (CITIC Baijiu Index down 4.6% YTD vs. CSI 300's 22.5% underperformance). - Q3 2025 saw listed baijiu firms' revenue decline 18.4% YoY (31.5% excluding Kweichow Moutai) and net profit drop 22.1% YoY (47.7% ex-Moutai). - Current sector P/E of 20x (TTM) sits at long-term bottom quartiles, reflecting excessive pessimism. - Leading baijiu companies now offer dividend yields above 65%, enhancing investment safety margins.

2. Beer Sector: - The industry faces structural shifts from price-driven to quality-focused competition. - Craft beer and fresh draft beer formats are eroding market share of traditional leaders. - 2026 performance will depend on pricing strategies amid expected cost pressures.

Risk factors: Weaker-than-expected consumption demand, rising production costs, intensified competition, food safety incidents, and potential tightening of entertainment-related policies.