To The Moon

Absolutely wild. After years of declines, liquor stocks have staged a rare, across-the-board explosion. $Kweichow Moutai Co.,Ltd.(600519)$ , with a market cap of RMB 1.8 trillion, jumped more than 8.6%. $Wuliangye Yibin Co.,Ltd.(000858)$ , $Luzhou Laojiao Co.,Ltd.(000568)$ , $Shanxi Xinghuacun Fen Wine Factory Co.,Ltd.(600809)$ , and $Jiangsu Yanghe Distillery Co.,Ltd.(002304)$ all surged in unison — even liquor ETFs ripped higher.

Hong Kong–listed liquor names were even crazier. $ZJLD(06979)$ soared over 12%, while the $EFUND LIQUOR(03189)$ surged more than 11%.

On the news front, liquor stocks are getting a double boost.

First, with the Spring Festival approaching, some tobacco and liquor retailers have started stocking up early. At the same time, Kweichow Moutai has tightened supply to support prices, leading to a rebound in the market price of Feitian Moutai. The price of an original-box bottle has risen to 1,610 yuan, up 20 yuan from yesterday.

Second, media reports indicate that several property developers are exempt from monthly reporting of their “three red lines” debt metrics. This news triggered a collective surge in real estate stocks, with $SUNAC(01918)$ surging over 26%, $KAISA GROUP(01638)$ climbing more than 21%, and $COUNTRY GARDEN(02007)$ soaring over 16%!

Liquor is closely tied to real estate. On one hand, the sector involves frequent government and business banquets and project-related entertainment. On the other, real estate serves as the primary wealth repository for Chinese households. The previous sharp decline in housing prices weakened the wealth effect, leading to reduced consumer spending.

Should the real estate market stabilize and rebound, liquor could also reach a turning point!

From a valuation perspective, Kweichow Moutai's price-to-earnings ratio stands at just 19 times, near its decade-long low:

Additionally, according to LV's disclosed financial report, revenue in the Asia region (excluding Japan) grew by 1% year-on-year in the fourth quarter of last year, marking two consecutive quarters of positive growth. This performance outperformed Europe and Japan, signaling that spending by affluent domestic consumers has remained resilient: $LVMH-Moet Hennessy Louis Vuitton(LVMHF)$

However, the performance of baijiu companies is still bottoming out. According to the 2025 earnings forecasts released by baijiu companies like $Sichuan Swellfun Co.,Ltd.(600779)$ and $Anhui Kouzi Distillery Co.,Ltd.(603589)$ , net profits in the fourth quarter are still experiencing a significant decline!

For instance, $Sichuan Swellfun Co.,Ltd.(600779)$ projects a 2025 net profit of 392 million yuan. Based on this projection, its fourth-quarter net profit is estimated at approximately 66 million yuan, representing a 69.4% year-on-year decline—only slightly less than the 75% drop recorded in the third quarter of last year.

$Anhui Kouzi Distillery Co.,Ltd.(603589)$ fared even worse, with fourth-quarter net profit projected at approximately 3 million yuan, marking a 99% year-on-year decline. This represents a widening of the decline from the 92.5% drop recorded in the third quarter of last year.

From this perspective, the fourth-quarter performance of baijiu is likely to remain dismal!

In terms of sales volume, according to data from the National Bureau of Statistics, China's tobacco and alcohol retail sales reached 62.3 billion yuan in December last year, marking a 2.9% year-on-year decline and the second consecutive month of contraction:

Therefore, the sharp surge in liquor stocks today is primarily driven by their significant prior declines coupled with the rebound in Moutai's market prices. Future focus should be on whether prices can sustain their recovery.

Looking ahead, Bloomberg analysts anticipate that sales of leading liquor brands like Moutai and Wuliangye will bottom out by year-end and potentially deliver stronger-than-expected performance by 2027. This outlook stems from distributors accumulating substantial liquor inventories during the pandemic, coupled with production-control measures implemented by distillers in 2025 that triggered a sharp earnings decline in the third quarter of last year. Following inventory digestion and benefiting from a low performance base in Q3 last year, liquor companies are poised to reach a turning point by year-end!

Currently, the only liquor ETF listed on the Hong Kong stock market is $EFUND LIQUOR(03189)$ . Its top four holdings are Kweichow Moutai, Luzhou Laojiao, Shanxi Fenjiu, and Wuliangye, collectively accounting for a substantial 60% of its net asset value: $EFUND LIQUOR(03189)$