Orient: The end of the liquor cycle accelerates the destocking, performance downgrades drag down stock prices gradually weakening.

Orient released a research report stating that the total sales of the entire Baijiu industry have dropped by nearly 20% since the beginning of 2026. Excluding Maotai, it is estimated that the sales of the entire industry have decreased by 20%-25%. In terms of inventory, the Baijiu industry is still in the latter half of the inventory cycle, in a passive destocking state. Some brands' inventory in Q1 2026 is showing an accelerated decline, but it will still take some time for inventory levels to bottom out. The lack of commercial and government scenarios continues to drag down industry sales. The core contradiction in the sector since 2025 has been "killing performance", and the first quarter of 2026 will assist the market in confirming the bottom of the Baijiu industry's performance. Orient's main points are as follows: Baijiu consumption is not afraid of decline, but afraid of not declining, expecting downward revisions to create price upside By the consumer expenditure calibre, it is estimated that the total sales of the industry have dropped by nearly 20% since the beginning of 2026, excluding Maotai, the estimated sales of the entire industry have decreased by 20%-25%. Among them, the average price of Baijiu products excluding Maotai is estimated to be -10% year-on-year, and the sales volume is estimated to be -15% year-on-year. The decline in demand side will help the market to make a one-time correction to the performance expectations of the leading companies, and stock prices may no longer be affected by performance drag. The destocking at the end of the cycle accelerates, and the commodity attributes of Baijiu continue to be reshaped Since 2026, the Baijiu industry has shown the following characteristics: 1) Household consumption and daily consumption are relatively rigid, the fast-moving consumer goods nature of Baijiu is strengthened, achieving a second transformation of consumer groups; 2) Enterprise management concepts are no longer uniformly "scale-oriented", core evaluation indicators return to channel profitability; 3) Currently, Baijiu is still in the latter half of the inventory cycle, in a passive destocking state, and some brands' inventory in Q1 2026 is showing an accelerated decline, but it will still take some time for inventory levels to bottom out. The lack of commercial and government scenarios continues to significantly drag down industry sales; 4) Considering that the core products of Maotai and Wuliangye Yibin have shown positive volume growth in the first two months of 2026 under the current price system, it is inclined to speculate that the industry may have basically reached the bottom in terms of price in 2026 Q1, marking the first appearance of "price-leading quantity rigidity" since the adjustment in 2023. Stock price advances three steps and retreats two, from a rebound to a reversal, the first quarter report is a turning point Orient stated that the core contradiction in the sector since 2025 has been "killing performance", and the first quarter report of 2026 will assist the market in confirming the bottom of the Baijiu industry's performance. Looking at the annual perspective, the drag of performance revisions on Baijiu stock prices may end in 2026, the growth certainty of leading companies will once again be highlighted, and the core driver of sector stock prices will shift from trading structure (driving stock price rebound) to performance certainty (driving stock price reversal). The sector is likely to present the feature of "significant stock price increase with valuation leading the way" in the second half of 2026, and investors should hold their positions. Investment advice The gradual weakening of the drag from performance revisions on stock prices, the core driver of the Baijiu sector will shift from trading structure to performance certainty, the bargaining attributes of the sector will decline, and the allocation value will strengthen: 1) For leading companies with market share logic, Shanxi Xinghuacun Fen Wine Factory (600809.SH), Kweichow Moutai (600519.SH), Wuliangye Yibin (000858.SZ) are recommended; 2) For targets with high regional occupancy, Jiangsu King's Luck Brewery Joint-Stock (603369.SH), Anhui Gujing Distillery (000596.SZ), Jinhui Liquor (603919.SH), as well as ZJLD (06979) in Hong Kong are recommended; 3) Elastic targets: Shede Spirits (600702.SH), Jiugui Liquor (000799.SZ), Sichuan Swellfun (600779.SH). Risk warning Food safety, management changes, delayed industry inflection points, industrial policy adjustments, etc.