Company Reports

Chinese baijiu sales have deteriorated since the second half of 2024, and the sector has lagged the broader market. An aging population and falling per capita drinking rates point to a shrinking pool of buyers, prompting us to reassess competitive strength across our coverage.

Second-quarter results from our mass-market baijiu coverage diverged. Anhui Yingjia continued its growth trajectory from the first quarter, with net profit rising 8% year on year, while Anhui Gujing's earnings deteriorated further, with net profit plunging 58%.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

Anhui Yingjia's 2025 revenue and net profit fell 18% and 23%, respectively. The firm returned to growth in the first quarter of 2026, with revenue rising 9% year on year and net profit up 1%, snapping five consecutive quarters of contraction.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

Our channel checks continue to indicate persistent weakness in baijiu demand, with the sector facing double-digit revenue declines ahead of the Lunar New Year holiday. However, performance varies across segments—premium baijiu, led by Moutai, is showing signs of modest demand improvement.

Anhui Yingjia's third-quarter performance continued to reflect demand headwinds, with revenue and net profit falling 21% and 39% year on year, respectively.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

Our channel checks continue to indicate persistent weakness in China's consumer sentiment and elevated inventory levels for Baijiu. Golden Week sales for the sector declined by 20%-30% year on year, and inventory levels have increased by about one month.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

Anhui Yingjia's second-quarter performance weakened, with revenue and net profit falling 24% and 35% year on year, respectively.

Anhui Yingjia posted year-on-year growth in revenue and net profit of 9% and 13%, respectively, in 2024, followed by declines of 12% in revenue and 10% in net profit for the first quarter of 2025.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

Amid China's macroeconomic and consumption headwinds, our baijiu coverage trailed the broader market in 2024, falling 19% on average, compared with a 13% rise in the Shanghai Composite Index.

Near-term headwinds in the macroeconomy have weakened baijiu demand and the sector’s profitability, with slower year-over-year sales growth across all segments in the third quarter versus the previous quarter. We expect the cyclical weakness to persist in the next 1-2 quarters, and we remain selective, with a preference on premium and leading brands given their relatively resilient demand.

Narrow-moat Anhui Yingjia posted decent second-quarter results, with revenue and net profit rising 19% and 28% year over year, respectively. The results were largely in line with our expectations, which reaffirmed our view that demand for mainstream-focused leading baijiu brands should remain robust despite slower economic growth and still-sluggish consumer sentiment in China. We believe Yingjia’s leadership in its home market of Anhui province positions it as one of the key beneficiaries of increased traveling and socializing, also aided by the stronger local economy versus the other provinces. These will continue to drive robust demand and a solid premiumization trend for the firm’s baijiu sales. In addition, an accelerating mix upgrade, along with improving cost efficiency, should further support margin expansion. We maintain both our earnings forecasts and our fair value estimate of CNY 66 per share for Yingjia, and we think the shares are undervalued currently, underpinned by a strong five-year net profit compound annual growth rate of 16% between 2023 and 2028.

Despite still-sluggish consumer sentiment in China, demand for mainstream-focused leading baijiu brands remains robust. Anhui Gujing and Anhui Yingjia both posted strong 2023 and first-quarter 2024 results, with net profits slightly ahead of our expectations on accelerating mix upgrades and optimized costs. We believe Gujing’s and Yingjia’s leadership in their home market of Anhui province positioned the two companies well as the key beneficiaries of increased travelling and socializing, as well as the stronger local economy. These will continue to drive a robust demand and premiumization trend for baijiu sales, while improving cost efficiency will further boost margins.

Anhui Yingjia is one of the four “Golden Flowers” in the Anhui local baijiu market, and it produces rich-flavored baijiu with a strong focus on mainstream products. Despite a weaker brand heritage, the company has gained a reputation as one of the few natural and organic baijiu producers in the industry, successfully launching its higher-end flagship product Dongcang Yearly in 2015. This allows the company to upgrade its product mix and capture the solid premiumization trend in Anhui, and generate economic profits well into the future, in our view.

We expect the China baijiu sector to extend its sluggish sales into first quarter 2024, which is reflected in lower wholesale prices and higher inventory levels for the sector as a whole compared with a year ago. However, performance was divergent across segments. Our channel checks suggest demand for premium baijiu and mainstream-focused local brands remains resilient. In contrast, subpremium brands, except Shanxi Fen Wine, have witnessed varying degrees of sales pressure, as demand is closely tied to overall economic conditions. This is mainly in line with our earlier assumptions, and we maintain both our earnings forecasts and fair value estimates for the baijiu names we cover.

Despite current sluggish consumption in China, baijiu companies’ third-quarter results reflect resilient demand for premium and mainstream-focused leading local brands. Subpremium names witnessed varying degrees of sales pressure. This is largely in line with our expectations, and we maintain our fair value estimates of Wuliangye at CNY 196 per share, Yanghe at CNY 177, Gujing at CNY 225, and Jiugui at CNY 82. We raise our fair value estimate of Yingjia to CNY 65 per share from CNY 61, to reflect a stronger-than-expected product mix upgrade. At the current levels, Wuliangye and Yanghe are undervalued relative to our fair value estimates, while Gujing, Yingjia, and Jiugui are all fairly valued or slightly overvalued. To recap, Kweichow Moutai’s September-quarter results released last week were slightly disappointing, which we think was due to seasonal factors.