Soochow: Liquor clearance accelerates, bottom becomes clearer, Kweichow Moutai (600519.SH) is preferred.

Soochow released a research report stating that the liquor industry as a whole will start to enter a deeper adjustment phase in 2025 Q2, with the industry expected to continue the trend of clearance and bottom-building in 2026 H1. The current clearance period is critical, and a new inventory cycle in 2026 Q3 (stabilization of prices, improvement in restocking intentions) is expected to occur. The report predicts that the year-on-year revenue growth rate of the liquor industry in 2026 will show a low-to-high trend, with a positive outlook for the sector expected to form by mid-year. The recommendation is to simplify complexity and focus on investing in companies that have a high level of clearance credibility, strong management and operational capabilities, and growth potential. Kweichow Moutai (600519.SH) is recommended as the first company to stabilize sales and open up growth space for ToC. Key points from Soochow: Accelerated clearance in 2025, especially in the second half of the year, with a narrowing decline in revenue in 26Q1 In 2025, the liquor sector saw a year-on-year decline of 18.1% in revenue, a 23.9% decline in net profit attributable to shareholders, and a 24.2% decline in net profit attributable to shareholders after deduction; in 26Q1, revenue in the liquor sector fell by 0.1% year-on-year, net profit attributable to shareholders fell by 1.4%, and net profit attributable to shareholders after deduction fell by 1.5%. In the second half of 2025, the sector accelerated clearance, especially in 25Q4, with a greater decline in revenue compared to the previous three quarters. The increasing pressure on sales turnover from distributors has led liquor companies to focus on releasing pressures on their financial statements. In 26Q1, demand for liquor increased due to the peak season of the Spring Festival, but there is still a gap in year-on-year comparison, with personal dining and banquet scenarios gradually recovering, while the business scenario remains at a low level. Revenue side: Accelerated exploration of the bottom across the board, Maotai and Yifang leading the stabilization in 26Q1 In 2025, revenue in the liquor sector fell by 18.1% year-on-year, net profit attributable to shareholders decreased by 23.9%, with revenue in H1 25 and H2 25 dropping by 12.7% and 24.7% respectively year-on-year, while net profit attributable to shareholders decreased by 16.5% and 33.8% respectively. In terms of quarters, the revenue growth of mid-to-high-end products has been accelerating since 24Q2, and the decline in revenue is relatively better than other sub-sectors of the liquor industry; high-end and regional leading companies have been accelerating since 25Q2-25Q3, with revenue decline steadily expanding, releasing pressure on financial statements in a timely manner. In 25Q4 and 26Q1, most liquor companies' revenue growth rate is high-end (-22.39%) > regional liquor (-43.9%), while in 26Q1, high-end (8.8%) > mid-to-high-end (-19.4%) > regional liquor (-26.1%). Product structure decline and slow turnover of sales have tested liquor companies' gross sales in the downward trend, with some impact from negative scale effects. Risk warning: Risks of slower-than-expected consumption recovery and intensified industry competition.