Guotai Haitong: The baijiu industry still has structural opportunities; prefer leading players at each price point.

Guotai Haitong released a research report stating that the baijiu industry has been accelerating its bottoming-out since 25Q3, with financial statements undergoing deep clearing for multiple consecutive quarters. In the short term, the industry is still grinding through the bottom, and companies that clear faster are expected to gain greater elasticity; in the medium to long term, the top choice is companies with brand foundations, strong management capabilities, and the ability to achieve regional expansion. In 2024, baijiu began a deep adjustment, and from 2025 onward it faces new circumstances. Building on previous analysis, the bank discusses the "bottoming-recovery" process in the cycle's evolution, believing the industry still has structural opportunities and preferring leaders at each price point. Guotai Haitong's main views are as follows: Baijiu inflection point: sell-through, financial statements, inventory, and wholesale prices intertwined, with policy catalysts expected Judging from the current adjustment in baijiu, the bank believes the worst point for sell-through has passed, financial statements are in a state of deep adjustment, and the industry is expected to enter a substantive destocking phase after the intersection of the "sell-through-financial statements" trends. As the above situations occur successively, wholesale prices of products across price bands are also expected to confirm a bottom and stabilize and rebound, further supporting a recovery in fundamentals and stock prices. In addition, considering that the baijiu sector's valuation percentile is lower than that of the broader market and its micro structure has improved considerably, combined with more proactive macro policies that may be implemented, the expected inflection point for baijiu is likely to arrive. Breaking down volume, price, and structure to find baijiu's potential space Indicators such as sell-through and inventory mainly measure short-term changes in the industry. Looking ahead from a medium- to long-term perspective, the bank believes baijiu should mainly focus on three aspects: volume, price, and structure, manifested as: after a short-term shock, volume returns to a mild downward trend; the consumption and asset attributes supporting prices gradually stabilize and are expected to rise again in the future; changes in industry structure, with demand concentrating toward personal consumption and supply concentrating toward leading liquor companies. Based on this, the industry still has incremental opportunities in some segmented areas. Seeking excess returns: strong brands and strong capabilities forge baijiu "growth stocks" From the review results, the long-term driver of baijiu stock prices remains fundamentals, and steady growth often brings excess returns. Referring to the situation during the previous cycle reversal, the bank believes this round still favors growth, but the scope has changed, manifested as: moderate or relatively small brand size no longer means a higher ceiling and greater room for growth; on the contrary, those with a brand foundation, strong management capabilities, and the ability to achieve regional expansion will achieve more sustained growth. Among these, brand determines the height of nationalization, and management capability determines the success rate of nationalization, and these are mostly leading companies or relatively large companies. At the same time, as baijiu companies strengthen shareholder returns, dividend yield will also become a reference factor in decision-making. Risk warnings: consumer policy tightening again, sharp declines in wholesale prices, food safety risks.