CITIC Securities has released a research report indicating that in the first half of this year, A-share listed baijiu companies recorded a year-on-year revenue growth of -6.7% and attributable net profit growth of -8.3% (excluding Moutai and Wuliangye, the declines were -20.9% and -33.3% respectively). Beer companies posted revenue growth of +0.1% and profit growth of +0.9%, primarily attributed to subdued consumer activity.

The brokerage anticipates that the steepest phase of the sector's decline has now passed, with the industry poised for a gradual recovery. It recommends investors to selectively increase exposure to leading baijiu enterprises during dips.

Baijiu: Balance Sheets Undergo Real Consolidation, with Targeted Spending on Consumer Education

For the first half of 2026, 19 listed baijiu companies on the A-share market generated combined operating revenue of RMB 197.89 billion, down 6.7% year-on-year, with attributable net profit of RMB 73.10 billion, down 8.3%. The decline in reported figures widened compared with the first quarter (excluding Moutai and Wuliangye, revenue and profit fell 20.9% and 33.3% respectively). CITIC believes that baijiu companies' balance sheets have been undergoing genuine consolidation since the third quarter of 2025. However, concurrent improvements in payment collection quality metrics suggest that the reported declines stem from channel inventory destocking rather than a sharp deterioration in actual sell-through.

Given that the recovery of consumption scenarios remains slow and sell-through rates stay low, the firm projects continued pressure on reported figures for listed baijiu companies in the second half of the year, though the pace of decline is expected to narrow gradually on a lower comparison base.

Beer: Overall Weak Demand, Soft Volume and Price Momentum

In the first half of 2026, seven major domestic beer producers saw combined revenue of RMB 86.79 billion, up 0.1%, with aggregate attributable net profit of RMB 15.22 billion, up 0.9%, keeping overall profit margins stable. Over the longer term, the beer sector continues its premiumization push, but near-term market demand remains soft, with weak volume and price trends. Considering the pressure exerted by regional craft breweries on major brands, CITIC expects leading players to prioritize "volume stability and price defence" as their core operational strategy for the full year. On the cost side, rising aluminium prices are expected to be offset by declines in barley and other raw material costs, while selling expenses may see moderate increases. The firm forecasts relatively concentrated promotional investments during the period from Q4 2026 to Q1 2027, while maintaining reasonable and orderly inventory levels.

Industry Allocation Value Emerges; Tracking Mid-Autumn, National Day and Spring Festival Peak Seasons

Following the industry's deep adjustment, the sector's allocation value is gradually becoming apparent (as of September 8, 2026, the CSI Baijiu Index has fallen 22.3% year-to-date). Dividend payout ratios for Moutai, Luzhou Laojiao, Gujing Gongjiu and Shanxi Fenjiu have climbed to 79%, 78%, 66% and 65% respectively, with leading baijiu companies generally offering dividend yields above 4%—markedly higher than long-term interest rates. Combined with institutional positioning at historical lows and valuations sitting at relatively low historical percentiles, high dividends have established a solid safety cushion for the sector.

In terms of timing, the next key catalysts for baijiu are the Mid-Autumn Festival and National Day peak season (Mid-Autumn falls on September 25) and the 2027 Chinese New Year period (Spring Festival falls on February 6). The firm believes Mid-Autumn sell-through will not disappoint, though expectations should remain tempered given that distribution channels still carry historical burdens that need resolution. For beer, the 2026 peak season was dampened by rainy weather and a sluggish restaurant recovery, prompting the industry to shift toward active inventory reduction and rational consolidation. CITIC suggests monitoring Spring Festival stocking and price hike signals going forward.

Risk Factors

Risks include lower-than-expected macro consumption demand; intensifying competition in the baijiu sector; weaker-than-expected market performance of core baijiu product prices; elevated channel inventory risks; rising raw material costs in beer; and food safety issues, among others.

Investment Strategy

After the baijiu sector experienced a severe overselling driven by both sentiment and capital flows in the first half of the year, it has been in a recovery phase of valuation repair since July, benefiting from a market style rebalancing and improved liquidity. CITIC believes that the sector's fundamentals are gradually stabilising at the bottom, evidenced by stabilising wholesale prices supported by supply controls, marginal improvements in sell-through on a low base, and initial signs of inventory destocking. Since August, the warming of consumption scenarios such as graduation banquet season has driven a sequential improvement in baijiu sell-through. The firm anticipates that channel pessimism regarding Mid-Autumn peak season performance may ease, while appropriately positive expectations can be maintained for the upcoming New Year peak season.

CITIC holds a constructive view on the baijiu sector's recovery rally and recommends investors to gradually increase positions in leading baijiu companies at lower valuations. Given the revenue pressures faced by the beer segment throughout the year, attention should be directed toward players with demonstrated market expansion capabilities.