Orient Securities released a research report stating that it estimates the total sales value of the baijiu industry has declined by nearly 20% since the beginning of 2026. Excluding Kweichow Moutai, the estimated sales decline for the entire industry is 20%-25%. From an inventory perspective, the baijiu sector is currently still in the latter half of the inventory cycle, characterized by passive destocking. Furthermore, inventory for some brands showed an accelerated decline in Q1 2026. However, it will still take some time for inventory levels to bottom out, and the absence of business and government consumption scenarios continues to significantly drag on industry sales volume. The core issue for the sector since 2025 has been "earnings compression." The Q1 2026 financial reports are expected to help the market confirm the bottom for baijiu companies' earnings.
Orient Securities' main views are as follows:
Baijiu consumption is characterized by "less fear of decline, more fear of no decline," and downward revisions to expectations create room for stock prices to rebound. Based on consumer expenditure data, it is estimated that total industry sales have declined by nearly 20% year-to-date in 2026. Excluding Moutai, the estimated sales decline is 20%-25%. For baijiu products excluding Moutai, the estimated average selling price has decreased by approximately 10% year-on-year, while sales volume has declined by about 15% year-on-year, with volume likely being the primary drag. Overall, the downturn in industry demand helps the market to adjust earnings expectations for leading companies in one go, and stock prices may no longer be weighed down by earnings performance.
Inventory reduction accelerates at the cycle's tail end, and the commodity attributes of baijiu continue to be reshaped. Since the start of 2026, the baijiu industry has exhibited the following characteristics: 1) Household and daily consumption are relatively resilient, strengthening the fast-moving consumer goods (FMCG) attributes of baijiu and achieving a second shift in the consumer base; 2) Corporate management philosophies have generally moved away from being solely "scale-oriented," with core performance indicators returning to channel profitability; 3) The sector remains in the later stage of the inventory cycle, experiencing passive destocking. While inventory for some brands declined at an accelerated pace in Q1 2026, the arrival of the inventory bottom still requires time. The lack of business and government occasions continues to significantly impact industry sales volume; 4) Considering that the core products of Kweichow Moutai and Wuliangye have shown positive volume growth in the first two months of 2026 under the current price system, it is tentatively speculated that industry prices basically bottomed out in Q1 2026. This marks the first time since the industry's adjustment began in 2023 that the characteristic of "price rigidity exceeding volume rigidity" has appeared.
Stock prices advance three steps and retreat two; transitioning from a rebound to a reversal, with Q1 earnings reports serving as the watershed moment. Orient Securities indicates that the core conflict for the sector since 2025 has been earnings compression. The Q1 2026 reports will assist the market in confirming the bottom for baijiu earnings. From an annual perspective, the negative impact of earnings downgrades on baijiu stock prices is likely to end in 2026. The growth certainty of leading companies will become prominent again. The primary driver of sector stock prices is expected to shift from trading dynamics (driving price rebounds) to earnings certainty (driving price reversals). The sector is highly likely to exhibit the characteristics of "significantly rising stock prices, with valuation leading the way" in the second half of 2026. Investors are advised to maintain positions.
Investment recommendations: The drag on stock prices from earnings downgrades is gradually weakening. The core driver for the baijiu sector is shifting from trading structure to earnings certainty. The speculative nature of the sector is receding, while its allocation value is strengthening. Recommendations include: 1) Leading companies with a market share growth narrative, such as Shanxi Xinghuacun Fen Wine Factory, Kweichow Moutai, and Wuliangye; 2) Companies with high regional market share, such as Jinshiyuan, Anhui Gujing Distillery, and Jin Hui Wine, as well as the Hong Kong-listed Zhenjiu Lidu; 3) High-beta plays: Shede Spirits, Jiugui Liquor, and Sichuan Swellfun.
Risk warnings include food safety issues, management changes, delays in the industry inflection point, and adjustments to industrial policies.