In recent years, the baijiu sector has been declining in a less-than-graceful manner. Market discussions about whether the golden era of baijiu is over and when the bottom will finally be reached have become a long-running focus.
Since October, the baijiu sector seems to have received some warmth. On October 30, baijiu stocks surged across the board, with the CSI Baijiu Index jumping more than 5%. Huangtai Liquor, Gujing Distillery, and Yingjia Distillery all hit the daily limit, Luzhou Laojiao also hit the daily limit for the first time in nine months, and Kweichow Moutai rose more than 2%, with its share price reaching a nearly six-month high. On the 29th, what was called the worst set of third-quarter reports for the baijiu industry in recent years landed collectively. The numbers on the earnings sheets were not pretty, yet share prices collectively hit the daily limit. What does this divergence mean? After nearly five years of continuous adjustment, has baijiu finally reached an inflection point?
Where to start
Over the past week, baijiu companies have successively released their third-quarter reports. If looking only at year-on-year comparisons, most liquor companies' results were indeed bleak. Luzhou Laojiao reported revenue of 14.668 billion yuan and net profit attributable to shareholders of 5.671 billion yuan for the first three quarters, with year-on-year declines of 36.58% and 47.31% respectively, and the single-quarter year-on-year decline further expanded. Gujing Distillery's Q3 net profit fell 68% year-on-year, so calling this third-quarter report the worst in recent years is not an exaggeration.
But positive signals also emerged. Luzhou Laojiao's Q3 net profit attributable to shareholders was 1.332 billion yuan, up 111.12% quarter-on-quarter from 631 million yuan in Q2, and the quarter-on-quarter revenue growth also reached 71.45%. Shanxi Fenjiu and Shede Spirits also completed a directional shift on a quarter-on-quarter basis. Shede Spirits' Q3 net profit was 49.55 million yuan, turning profitable quarter-on-quarter, with a year-on-year increase of 72.44%, and its gross margin rose 4.7 percentage points year-on-year. Yingjia Distillery's performance showed a rare double increase, with Q3 revenue of 1.413 billion yuan, up 4.25% year-on-year, and net profit attributable to shareholders of 414 million yuan, up 8.58% year-on-year. Moreover, in the third quarter, Yingjia Distillery's contract liabilities balance was 454 million yuan, up 30 million yuan from the end of the second quarter, sales cash receipts were 1.56 billion yuan, and operating net cash flow was 516 million yuan, up 9.3% year-on-year. The quarter-on-quarter recovery in contract liabilities means that during the off-season, distributors were still willing to pay money to the distillery, and the simultaneously improving cash flow also shows that these receipts were not built up through credit sales and inventory stuffing. Against the backdrop of weak overall industry willingness to make payments, regional leaders, due to the rigid demand from their provincial base markets, can more quickly complete the positive cycle of cash flow in the channels. By contrast, pan-national brands are still bearing the cost of active clearing, and their performance is relatively ugly. Wuliangye's Q3 operating cash flow turned positive year-on-year at 2.2 billion yuan, but contract liabilities fell by 1.5 billion yuan quarter-on-quarter, sales receipts were 7.21 billion yuan, and receivables financing dropped sharply by 6.5 billion yuan quarter-on-quarter. Behind such numbers is liquor companies actively tightening the pace of collections, no longer blindly pushing inventory to channels, but letting channels digest inventory first. Part of the single-quarter performance decline is precisely the cost of this active choice. But from another perspective, the single-quarter performance decline may have won breathing room for the channels. The ugly third-quarter data partly does reflect that real baijiu demand is still weak, but on the other hand, it is also liquor companies actively relieving pressure on channels and squeezing the "water" brought by past inventory stuffing out of the financial statements. After multiple consecutive quarters of demand contraction and channel destocking, the quarter-on-quarter return to positive performance of some liquor companies may not mean the inflection point has arrived. Under a low base in the fourth quarter, some liquor companies are expected to turn positive, but the direction is still bottoming rather than reversal. Taken together, however, it still shows that industry risks have been fully released, and the bottoming characteristics of the baijiu cycle are becoming increasingly obvious. Yet recovery is destined not to happen overnight. Regional leaders have stronger demand resilience because consumption scenarios in their base markets are more oriented toward mass banquets and daily drinking, and the channel digestion path is shorter. Pan-national brands have accumulated longer distribution chains and heavier inventory burdens over the past few years, so clearing naturally requires more time. From the perspective of price bands, the structure of strength at both ends and weakness in the middle is also further taking shape. Feitian Moutai achieved double-digit year-on-year growth in sell-through across multiple regions, making it one of the very few ultra-high-end single products still maintaining positive growth. At the low price band, mass-priced products below 100 yuan such as Bokfen and Yingjia Dong 6, benefiting from demand driven by self-drinking and family gatherings, saw stable or even slightly growing sell-through. Compared with the previous industry recovery rhythm, which was mostly led and defined by top liquor companies such as Moutai, Wuliangye, and Luzhou Laojiao, this round of recovery rhythm is clearly very different from the past. But the worst time may already be over.
Why just 10 ASX 200 shares?
After the peak of prosperity in 2021, baijiu did not escape the previous cyclical path. The entire industry similarly unfolded in sequence from weakening demand, declining wholesale prices, accumulating channel inventory, to financial statement clearing, except that this time the road has been longer than before. By the third quarter of 2026, this chain has advanced to its final stage, but it is not yet complete. And if it is to truly move toward recovery, this process must also be completed. Beyond the localized warming in the third-quarter reports, during the just-passed 2026 Mid-Autumn and National Day holidays, channel data showed that overall baijiu industry sell-through fell about 10% year-on-year. Although still declining year-on-year, the decline was about 20% in the same period of 2025 and about 30% in the same period of 2024. The narrowing of the decline for two consecutive years shows that the downward slope on the demand side is slowing. In terms of wholesale prices, the loose-bottle wholesale price of Feitian Moutai stabilized around 1,710 yuan after the holidays, the whole-case wholesale price was around 1,725 yuan, the wholesale price of Wuliangye Puwu remained around 780 yuan, and the wholesale price of Guojiao 1573 high-strength was about 830 yuan. Against the backdrop of wholesale prices sliding continuously over the past two years, the confirmation of a price bottom is a fairly important change. More critical is inventory. From an overall industry perspective, after nearly two years of active destocking, channel inventory has fallen to a historically low level. Moutai distributors are basically in a low-inventory or even no-inventory state, and Wuliangye distributor inventory fell year-on-year to about 10%–15%. Inventory levels in most regions have fallen back to a reasonable range, distributor dumping behavior has noticeably decreased, and the industry inventory cycle is shifting from active destocking to the early stage of passive destocking. But inventory falling to a reasonable range does not mean demand is recovering. There is still a key variable in between, namely whether distributors, after inventory normalizes, choose to restock or continue shrinking their balance sheets. The contract liability data in the third-quarter reports provides a rough perspective. Contract liabilities of regional leaders such as Yingjia Distillery and Gujing Distillery rebounded quarter-on-quarter, and Jinhui Liquor's contract liabilities reached 820 million yuan, up 30.3% year-on-year, showing that local terminal collections and channel stocking willingness are indeed repairing, which means local demand may have already touched bottom. However, at present, the absolute level of finished liquor inventory across the industry is still not low, and the repair of channel confidence is far from sufficient to support large-scale payments and stocking. The fourth quarter and the 2027 Spring Festival peak season will be key nodes for testing the turning point of the inventory cycle. In this sense, the price bottom and inventory bottom may have been preliminarily confirmed, but the demand bottom still needs time to verify. It is precisely in this narrow gap where the fundamental bottom is gradually becoming clear but recovery has not yet been confirmed that valuation and dividends begin to assume the pricing of baijiu companies, determining whether one can take a position early in the bottom area. After a period of gains, the rolling price-to-earnings ratio of the CSI Baijiu Index has risen to about 22 times, but it is lower than the historical median of 28.82 times and sits at the 23.96th percentile of the past decade. Over the past ten years, only less than a quarter of trading days saw baijiu cheaper than now. From the perspective of price-to-book ratio, it is even at an extremely low percentile of about 5% over the past decade. At the same time, institutional holdings in the baijiu sector have also fallen to a historical low, with the chip structure clearing before the fundamentals. The dividend yield, however, continues to climb. The dividend yield of the CSI Baijiu Index reached 4.45%, with Luzhou Laojiao above 7%, Wuliangye above 6%, and Shanxi Fenjiu above 5%. Today, the 10-year government bond yield is hovering near 1.6%, the spread between the baijiu sector's dividend yield and the 10-year government bond has reached the highest range in history, and the payout ratios of leading liquor companies are still rising. In a low-interest-rate environment, for consumer leaders with still-positive operating cash flow, no substantial weakening of brand barriers, and clear willingness to pay dividends, even if revenue growth cannot return to double digits, dividends and buybacks themselves provide shareholder returns and offer bottom support for share prices. Cheapness and dividends alone do not constitute a reason to buy, but they at least mean safety.
Final thoughts
The inventory cycle will not complete clearing along a smooth curve, and share prices will not rise in a straight line without pause. Baijiu will no longer return to the era when growth came simply from stuffing inventory. But a valuation of 20 times, a dividend yield above 4%, and accumulated inventory destocking mean that the most painful phase for this industry is most likely passing. The rest is left to time and differentiation. (Full text ends) ▍Past reviews Gelonghui statement: The views in this article all come from the original author and do not represent the views and stance of Gelonghui. Special reminder: Investment decisions must be based on independent thinking. The content of this article is for reference only and does not constitute any practical operational advice. Trading risks are borne by the investor.
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