China Reopening To Bolster Baijiu Demand; Leading Baijiu Firms Likely See Good Lunar New Year Sales

China removed all COVID-19 restrictions and opened its borders on Jan. 8, which we believe will improve consumption sentiment. Although the baijiu sector as a whole is still facing sales pressure, we think increased demand for socializing, along with premium baijiu’s irreplaceable position in the Chinese drinking culture, will help to support steady sales growth for leading baijiu brands. We lift our recurring 2023 net profit forecasts for Moutai, Wuliangye and Yanghe by 1%-5% to CNY 73 billion, CNY 31 billion and CNY 11 billion, respectively, driven by a slightly higher sales volume assumption. Accordingly, we raise fair value estimates by 2%-4% for our baijiu coverage, specifically, Moutai to CNY 1,620 per share from CNY 1,580; Wuliangye to CNY 196 from CNY 188; and Yanghe to CNY 177 from CNY 170. However, we think the shares are fairly valued as of market close on Jan. 18, and investors could wait for a better entry.