China Merchants Securities has released a research report indicating that for most liquor companies in the first quarter of 2026, their financial statements are expected to continue the inventory clearance trend observed since the third and fourth quarters of 2025, albeit with a narrower rate of decline. Many liquor enterprises did not enforce strong "good start" sales targets for Q1 2026, allowing continued release of channel inventory pressure. Price adjustments are nearing a bottom, and companies that initiated adjustments earlier are in a relatively stable position.
Notably, Kweichow Moutai's sales performance exceeded expectations. The increased volume from its "i Moutai" platform in the first quarter is expected to help the company avoid a performance decline, demonstrating overall robust strength. Wuliangye's sell-through also surpassed expectations, and its financials are anticipated to continue reflecting inventory clearance to shed burdens.
The year 2026 is projected to be a period of industry consolidation. Subsequent focus should be on the pace of destocking by liquor companies and the recovery of channel profits. Companies that adjusted early are likely to see marginal improvements in the second half of 2026. Key views from China Merchants Securities are as follows:
**Liquor Sector Q1 2026 Outlook: Continued Clearance, Strong Moutai Performance**
For Q1 2026, the financials of most liquor firms are expected to extend the clearance trend from Q3-Q4 2025, with a moderated decline. The absence of forced strong opening sales targets for many companies has facilitated ongoing channel inventory release. With price adjustments bottoming out, early-adjusting firms are under less pressure.
Overall, Kweichow Moutai's sales outperformed expectations. The volume boost from "i Moutai" in Q1 should support stable earnings, indicating strong performance. Wuliangye's sell-through was better than expected, with its financials likely continuing to show burden release through clearance. Luzhou Laojiao faced pressure from a significant decline in its high-end product. Fenjiu's progress was largely flat with a slight dip in sell-through, beginning to show clearance pressure in its financials.
Other companies exhibited varied adjustment paces. Firms like Yingjia and Shede that underwent deep adjustments earlier are expected to show relatively better performance in Q1 2026. The year 2026 is seen as a bottoming-out phase for the sector, with early-adjusting companies potentially achieving marginal improvement by H2 2026.
**Company Analysis: Strong Moutai, Relaxed Yingjia and Shede**
1) **Premium Baijiu**: Kweichow Moutai's Q1 2026 sales exceeded expectations. Dealer progress from January to March was rapid, with growing sell-through of standard Feitian Moutai. Post-holiday dealer inventory was generally under half a month. The launch of a non-standard consignment model reduced dealer pressure. Combined with the Feitian price increase on March 31st, which improved price transmission mechanisms, its performance is anticipated to significantly outperform the sector. Wuliangye's actual Q1 sell-through surpassed expectations, with its financials expected to continue clearing burdens. Luzhou Laojiao likely faced pressure from a double-digit decline in its high-end Guojiao product.
2) **Sub-Premium Baijiu**: Shanxi Fenjiu's Q1 progress was essentially flat with a slight sell-through decrease, though its low-end Bofen product maintained positive growth. Inventory pressure for its mid-range Qinghua 20 increased slightly, suggesting a lighter operational stance after Q1 adjustments. Jiugui Jiou saw continued decline in traditional channels but was boosted by better-than-expected performance of its Ziyou'ai brand. Shede experienced double-digit sell-through growth during the Spring Festival, followed by a normal seasonal slowdown. Shuijingfang maintained a healthy price system and is expected to continue adjustments in Q1.
3) **Regional Brands**: Yanghe continued destocking and price stabilization in Q1. Channel feedback indicated a slight single-digit decline for Haizhilan and a double-digit drop for the Dream series. Jinshiyuan received channel reports of growth for its Duikai and Danya products, but declines for Sikai and the V series. Gujinggong's channels reported relative stability for Gu5 and Gu8, a slight slowdown in Gu16 growth, and significant pressure on Gu20. Post-Q1 adjustments are expected to ease operational pressure in H2 2026. Kouzijiao still faced collection pressure during the Spring Festival amid intense core market competition, though other markets remained stable. Yingjia demonstrated strong sell-through during the holidays, with reinforced advantages for its Dong6 and Dong9 products, positioning it for potentially better-than-sector operational performance in Q1.
**Investment Advice: Divergent Adjustment Paces, Selective Stock Picking at the Bottom**
The liquor sector has returned to a bottom-buying opportunity. With Q1 earnings expectations clarified, previous suppressing factors have diminished. The top recommendation is to maintain sufficient positions in Kweichow Moutai. Other recommendations include Wuliangye, Shanxi Fenjiu, and Yingjia贡酒, whose investment rating has been upgraded to "Strongly Recommend" due to sustained momentum from its Dongcang series and potential to lead the sector out of adjustment.
**Risk Warning** Potential risks include weaker-than-expected subsequent sell-through, disappointing price performance, intensified competition, and rising costs.
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