Why did the performance weaken in the first half of the year? Is there a "stagnation lake" of inventory? How is market value management being conducted? Kweichow Moutai (600519.SH) responds to market concerns.

Today, Kweichow Moutai (600519.SH) held its 2026 semi-annual performance briefing. At the meeting, the company addressed the reasons behind the "slight increase in revenue and pressure on profits" in the first half of the year, as well as issues such as channel inventory, youth-oriented operations, and international transformation. Management also revealed that the company is formulating a market value management plan for the next three years (2027-2029). Regarding the situation in the liquor industry, Kweichow Moutai's management stated that the current liquor industry is undergoing deep adjustment, transitioning from an "entropy increase" phase during the expansion period to an "entropy reduction" phase of repair and optimization; significant changes are occurring in consumer demographics, scenarios, and habits. The traditional multi-level distribution and pressure sales model has transformed into a multi-level "reservoir" during the uptrend and evolved into a price "blocking lake" during the downtrend, creating multiple "insulation layers" between the old distribution system and real consumption, making it difficult to adapt to the consumption demands of the digital age. In response, Kweichow Moutai launched a consumer-centric market reform at the beginning of this year. In the first half of the year, the company achieved an increase in sales, with total operating revenue rising slightly by 1.3%. However, due to the adjustments in product prices in line with market conditions and the decline in the unit price of liquor, net profit decreased by 1.95% year-on-year. Specifically, in the second quarter of this year, the company's revenue fell by 5.23% year-on-year, and net profit declined by 6.9%, falling short of expectations. In this context, Kweichow Moutai's management acknowledged that the liquor industry is still in a state of deep adjustment during the first half of this year, but after the market reform, the overall sales and price system of the company remained stable. Sales of Moutai liquor and its series of products witnessed growth, with revenue steady and increasing, and the reform and transformation aligning with the companys expectations. However, the core of this round of market reform is to align with real consumption, which also led to a decline in the unit price of liquor and profit year-on-year. "In the second quarter of this year, during the market transformation phase of the Moutai series liquor, we chose not to solely focus on indicators and actively reduced distribution based on sales performance, avoiding the old cycle of channel pressure sales," Kweichow Moutai's management stated during the meeting. Financial reports indicate that in the second quarter, the Moutai series liquor achieved revenue of 5.053 billion yuan, down approximately 25% year-on-year, with single-quarter revenue growth turning negative. However, the core product within the Moutai series liquor, Moutai 1935, performed relatively well in the first half of this year. At the earnings meeting, Kweichow Moutai's management revealed that the execution plan for distributor contracts for Moutai 1935 is nearing 80%, and end-market sales and channel inventory are at healthy levels. The company previously clarified that it would not increase the market supply of Moutai 1935 this year, which may imply that supply of Moutai 1935 could be relatively tight in the second half of the year. Reporters from the Financial Press noted that currently, the market price of Moutai 1935 (53 degrees, 500ml) is approximately 635 yuan per bottle, an increase of about 20 yuan per bottle since the beginning of the year. "In the future, the company will rationally utilize the remaining planned quantity based on market conditions, make appropriate adjustments to relevant market policies, increase investment in market expenses aimed at end consumers, and eliminate sales incentive policies for distributors that sell below the contract price. At the same time, we will strengthen expense audits to strictly prevent violations such as expense misappropriation," Kweichow Moutai's management stated at the earnings meeting. The issue of Kweichow Moutai's social inventory has always been a focal point of concern for investors. At the earnings meeting, in response to market speculation regarding "the accumulation of 100 to 200 million bottles of Feitian Moutai in circulation channels potentially becoming a blocking lake," Kweichow Moutai's management denied this claim. They stated that currently, the monthly sales-to-inventory ratio in Moutai's social channels is below 1.0, and circulation inventory remains healthy. With the establishment of market pricing and dynamic adjustment mechanisms this year, the scope for speculation in the middle layer of the Moutai market has significantly narrowed, and the risks and willingness to hoard have declined, leading to speculative inventory being pressed to low levels, making it difficult to form stock "blocking lakes" that could disrupt the market. The stable pricing of Moutai liquor over the past seven months also supports this judgment. Regarding future operations, Kweichow Moutai indicated that the market reform in the first half of this year had achieved expected results, and in the second half, it will continue to fine-tune the advancement of market reforms, insisting on a consumer-centric approach to promote high-quality and sustainable operations. At the earnings meeting, Kweichow Moutai Chairman Chen Hua stated that fluctuations in corporate performance are normal phenomena during industry cycles and called on investors to consider corporate development over a longer time horizon. From a capital market perspective, Kweichow Moutai's management revealed that the company is preparing an overall market value management plan for the next three years (2027-2029), focusing on improving operations, enhancing information disclosure quality, maintaining regular communication with investors, and utilizing market value management tools to enhance shareholder returns. This article is reproduced from the Financial Press, edited by GMTEight.