Zheshang: Liquor decline narrows, bottoming out clearly, beer sector overall stable.

Zheshang released a research report stating that the liquor sector's bottom is clearly established (some companies have started to emerge from the adjustment period), with the most significant improvement in regional liquor sales declines, and the potential for resilience to move upward in the future. Key recommendations include: 1) nationwide liquor companies with clear bottoming and improving operations in subsequent quarters; 2) leading regional liquor companies with significantly narrowed declines and lower highs throughout the year; 3) strong beta targets. In the beer sector, high-end products with a high base number and significant cost advantages are expected to see better-than-expected results in the second quarter with a low base. In the medium to long term, with the implementation of subsequent consumer promotion policies and policy changes, beer sales and upgrade rates are expected to recover. Zheshang's main points are as follows: Liquor: The narrowing decline and clear bottoming out, and the proportion of regional liquor revenue/profit increasing In the 25-year liquor sector, revenue/mother net profit was 358.42/1261.45 billion yuan (-18.72%/-23.71%); in 26Q1, liquor sector revenue/mother net profit was 131.79/52.06 billion yuan (-0.66%/-1.18%), with a significant narrowing of the decline and a clear bottoming out. The increase in expense rate (overall slight increase) has led to a slight increase in net profit margin. The gross profit margin is still under pressure due to Maotai's downward trend in structure, but with a slight decrease in the same period, the top five customers' proportions have generally increased, and some companies have increased their annual dividend rates. In summary: 1) Concentration: Industry concentration is still increasing (the proportion of the top five customers of listed companies is also increasing, high-quality distributors are attracting brand companies during the adjustment period); 2) Industry: The difference between net profit growth and revenue growth in 26Q1 has narrowed compared to 25 years, and the industry's gross profit margin has declined compared to 25 years due to Maotai's structural downturn. However, due to high expense utilization (expense rate decline), the net profit margin has narrowed compared to 25 years, indicating a significant decrease in profitability; 3) Tiered viewing: Regional wine's revenue/profit accounts for +2/+4pct compared to the industry in 25 years, and the narrowing of the decline is most obvious, with YJ the first to turn positive and Yanghe greatly improving. The four-point reduction (Q1 operating quality significantly improves and net profit margin turns positive), Maotai is expected to have an upward trend in net profit margin in Q2, and revenue remains stable. 4) Sub-price view: The trend of differentiation continues, with only products in the 100-200 yuan price range performing well during the Spring Festival, making the structure of the second high-end and regional wines slightly downward, while the structure of third and fourth-tier wines is upward. Overall, the high-end wine is slightly under pressure, coupled with Maotai's strategy of exchanging price for volume, leading to a slight decrease in the structure of high-end wine. 5) Prepayment view: Industry contract liabilities are still slightly declining year-on-year/month-on-month, but some companies that are the first to emerge from the adjustment period are also showing positive prepayments (Fenjiu/YJ/Jinhui Liquor/Wuliangye Yibin prepayments year-on-year/month-on-month are all positive), indicating a good trend in the industry. 6) Individual stock view: Based on the 25 years and 26Q1 reports, Wuliangye Yibin, Hebei Hengshui Laobaigan Liquor, and Anhui Yingjiagongjiu have emerged from the adjustment period (revenue/profit growth has turned positive, net profit margin has narrowed or turned positive, and channel inventory has been cleared), with Yanghe's decline significantly narrowing (Q1 operational quality significantly improving and net profit margin turning positive). Maotai is expected to show an upward trend in net profit margin in Q2 and maintain stable revenue. Beer: Beer sales stability, excellent profit performance Revenue: The beer sector's revenue was 69.85 billion yuan in 2025, a year-on-year increase of 2.03%; in 26Q1, the sector's revenue was 20.35 billion yuan, a year-on-year increase of 1.00%. Profit end: The beer sector's mother net profit in 2025 was 8.53 billion yuan, a year-on-year increase of 16.65%; in 26Q1, the sector's mother net profit increased significantly to 2.68 billion yuan, a year-on-year increase of 6.12%, with significant improvement in performance. Scale: In 25 years, industry sales volume slightly declined, revenue slightly increased, and mother net profit slightly declined. In 26Q1, industry volume remained stable, excluding Budweiser's volume + small single digit, ASP remained stable, profit + mid-to-large single digit. Gross profit margin: The beer sector's gross profit margin in 2025 was 44.51%, a year-on-year increase of +0.37%; in 2601, the gross profit margin was 45.17%, a year-on-year increase of +1.77%. Expense rate: In 2025, the beer sector's sales/management/financial expense rates were 14.37%/5.94%/-1.17, a year-on-year increase of +0.25/+0.03pct/+0.31pct. In 26Q1, the sales/management/financial expense rates were 13.04%/5.57%/-0.77%, a year-on-year increase of 0.28pct/+0.29pct/+0.18pct. Net profit margin: The beer sector's net profit margin in 2025 was 14.68%, a year-on-year decrease of -1.70pct; in 26Q1, the net profit margin was 15.96%, a year-on-year increase of +0.59pct. Risk warning: Economic recovery falling short of expectations, industry policy risks, slow recovery of end demand, intensified industry competition, food safety risks, etc.