According to a research report from China Merchants Securities Co.,Ltd., short-term sales momentum for key brands is expected to accelerate in the week before the Spring Festival. The tight supply and continued price increases for Kweichow Moutai Co.,Ltd. are providing support for sector sentiment. In the medium to long term, institutional holdings in the sector have reached historical lows. Even if financial reports show some decline in 2026, leading companies such as Moutai, Wuliangye, and Luzhou Laojiao possess valuation and dividend safety margins. As multiple negative constraints at the cycle's bottom gradually dissipate, this is expected to lead to a dual upward revision in both the sector's earnings and valuations. Industry sales trends are in line with expectations, with Moutai's market vitality leading the way. The current pre-Spring Festival decline in industry sales momentum aligns with forecasts, and Moutai's robust performance remains ahead of peers. Attention continues to focus on the sales performance of various brands in the final week before the holiday. The main views of China Merchants Securities Co.,Ltd. are as follows.

The pre-Spring Festival decline in industry sales momentum met expectations, with Moutai's performance leading. Summarizing survey feedback from various regions before the 2026 Spring Festival, overall industry sales momentum still showed a double-digit decline, but this was anticipated. Demand is steadily increasing as the holiday approaches, companies are no longer applying pressure, existing burdens are being gradually cleared, but industry confidence still requires further restoration. Currently, the overall progress of repayments and shipments for the industry is slower than the same period last year. Distilleries are no longer mandating strong first-quarter targets, releasing pressure on channels. Only Moutai and Wuliangye have shipment progress faster than last year. From a sales momentum perspective, the concentration effect towards leading brands is evident. Premium brands are trading price for volume, and the market share of the top brand in each price segment continues to increase. Moutai, Wuliangye, and Fenjiu are performing better than the industry average, while other brands have experienced varying degrees of decline, with the sub-premium price segment facing significant squeeze. Regarding inventory, distributor inventories are continuously being drawn down, with value lower than last year's levels. However, considering the slowdown in sales momentum, the number of inventory days has not decreased significantly. Terminal store inventories have been cleared more thoroughly, and Moutai is experiencing periodic shortages, creating restocking demand. From a wholesale price perspective, Moutai's wholesale price has bottomed out and rebounded to the range of 1,600-1,700 yuan, expected to hold during the Spring Festival period. Wuliangye's wholesale price is probing the bottom but has overall support. Wholesale prices for other sub-premium and regional liquors have slightly declined overall.

Analyzing by product, Moutai exceeded expectations in both volume and price. Traditional channels receive monthly shipments, and channel inventory is essentially nil. Sales momentum shows double-digit growth, and terminal stocking enthusiasm has increased. The iMoutai channel has unlocked incremental consumer demand, with an estimated net addition of over 2,000 tons in January. Wuliangye's sales momentum varies by region, with expected volume roughly flat or slightly up year-on-year; velocity has accelerated in areas like Sichuan and Anhui. Luzhou Laojiao's high-strength Guojiao product saw sales momentum decline over 20% in many regions, while demand for the lower-strength version remains. For Fenjiu, sales momentum for Qinghua 20 slightly declined, while those for Bofen increased, though channel profits have narrowed somewhat. Among regional liquors, Jinshiyuan's double-digit decline was better than the industry average. Yanghe's sales momentum fell 15-20%, Yingjia Dongcang declined by a high-single-digit percentage, and Gujing Gongjiu saw a decline ranging from high-single digits to double digits, with its Gu 20 product under pressure, while Gu 8 and Gu 16 remained stable.

Analyzing by consumption scenario, government and business banquet spending remains subdued. Business banquets are primarily small-scale gatherings, and mid-to-high-end catering performance is sluggish. Gift-giving demand has seen some recovery, while mass consumption volume provides support. The iMoutai channel continues to stimulate mass demand; the earlier decline in Moutai's wholesale price effectively converted genuine consumers seeking authentic products at fair prices, increasing the mass consumption share to 20%. Looking ahead, sales momentum has room for further improvement during the Spring Festival. Moutai's supply shortage is expected to continue into Q1, supporting its price. The overall volume and price for the industry have not yet bottomed out. Close observation is needed on the potential for volume expansion at the bottom for Wuliangye and Fenjiu, and any improvement in dealer confidence, which may require distillery policies such as reducing supply volume or increasing subsidies. Institutional holdings are already at historical lows, and at the current position, key liquor companies possess safety margins. Through an in-depth analysis of baijiu heavy positioning data for Q4 2025, the active fund heavy positioning ratio in the baijiu sector fell again by 0.5 percentage points to 3.5% in Q4 2025. Measured by the overweight ratio, the sector's overweight ratio was only 1.0% in Q4 2025, down from 1.2% in Q3 2025, already below the levels of Q1-Q2 2013 and gradually approaching the levels of Q3-Q4 2013. Furthermore, in Q4 2025, fund managers focused on key sectors continued to rapidly reduce their positions in baijiu, while holdings among the broader fund universe are gradually stabilizing.

Risk warnings include subsequent sales momentum falling short of expectations, price performance being weaker than expected, intensifying competition, rising costs, and the possibility that channel survey data may not fully reflect the overall situation.