Luzhou Laojiao (000568): Nomura sees Luzhou Laojiao's 2026 adjustment setting up an earnings recovery from 2027F

Overview

This initiation report argues that Luzhou Laojiao is in a 2026 earnings-adjustment phase, but that resilient National Cellar 1573 pricing, eventual premium-volume recovery and lower selling expenses can restore growth from 2027F.

Core views

Nomura identifies mid- and high-end baijiu, led by National Cellar 1573 and supplemented by Luzhou Laojiao Tequ and Century-old Luzhou Laojiao Jiaoling Baijiu, as the central driver of Luzhou Laojiao's revenue and profit. Soft end-demand and channel adjustment are expected to keep this segment under pressure in 2026F. The report forecasts segment volume to fall 32.0% year-on-year to 25.4kt, while overall company revenue declines 27.3% to CNY18.72bn and net profit falls 32.1% to CNY7.35bn. The weak backdrop was already evident in 1H26, when revenue fell 36.4% year-on-year to CNY10.47bn and net profit fell 43.4% to CNY4.34bn; 2Q26 revenue and net profit declined 65.5% and 79.5%, respectively. The report argues that National Cellar 1573's retail pricing has remained broadly stable in 2026 year-to-date. It expects a shift away from lower-priced products to lift mid- and high-end ASP 4.0% in 2026F to CNY640k per tonne, rather than reflecting broad price increases. As lower-priced premium products recover, ASP is forecast to decline 2.0% in 2027F and remain stable in 2028F. Volumes are expected to recover from the low 2026 base by 7.5% in both 2027F and 2028F, reaching 27.3kt and 29.3kt. Mid- and high-end segment revenue is forecast at CNY16.24bn, CNY17.11bn and CNY18.40bn in 2026F-28F, with gross margin held at about 90%. Other baijiu is expected to prove relatively more demand-resilient because mass-market products are less dependent on business, gifting and gathering occasions. Nevertheless, Nomura forecasts other-baijiu volume down 8.0% in 2026F before 5.0% and 3.0% growth in 2027F and 2028F. Revenue is projected at CNY2.35bn, CNY2.52bn and CNY2.65bn, while gross margin declines from 49% to 47% and 46% as competition and promotion pressure persist. Margin recovery is the second major earnings driver. With channel and brand investment relatively rigid during a revenue contraction, the selling expense ratio is forecast to rise to 15.0% in 2026F, or about CNY2.81bn. As inventory pressure eases and tactical promotions and channel support diminish, Nomura expects the ratio to decline to 13.5% in 2027F and 12.0% in 2028F; selling expenses are forecast at about CNY2.67bn and CNY2.54bn. Blended gross margin is projected at 84.7%, 84.4% and 84.3% in 2026F-28F, while net margin recovers from 39.3% in 2026F to 41.2% in 2028F. This operating leverage supports Nomura's view that net-profit growth of 7.9% in 2027F and 9.9% in 2028F can exceed revenue growth of 5.6% and 7.2%. Nomura forecasts revenue of CNY19.76bn and CNY21.17bn and net profit of CNY7.93bn and CNY8.72bn for 2027F and 2028F. These estimates are slightly below Wind consensus: revenue is 0.8%, 1.2% and 2.2% below consensus in 2026F-28F, and net profit is 0.3%, 0.5% and 0.5% below, reflecting more conservative assumptions on demand recovery, premium volumes, competition and channel investment. For valuation, Nomura uses P/E because it considers baijiu companies to have mature business models and earnings profiles. The peer group averages about 17.5x P/E. Nomura assigns Luzhou Laojiao 17x 2026F P/E, about a 4% discount, because its 2026-28F EPS CAGR and ROE are below peers during the earnings adjustment. The discount is partly offset by National Cellar 1573's brand equity and pricing resilience and the expected recovery from 2027F. Applying 17x to 2026F EPS of about CNY5.00 produces the CNY84.92 target price, implying 21.4% upside; the stock was trading at about 14.0x 2026F P/E.

Analysis framework

Nomura reviews 1H26 operating trends, forecasts volumes, pricing, mix and expenses by baijiu segment through 2028F, compares its estimates with Wind consensus, and values the company against a selected baijiu peer group using 2026F P/E.

Methodology notes

• Industry AnalysisSupply-demand framework

  Segment volume, pricing, product mix, channel inventory and promotional spending analysis.

  The report links soft end-demand and channel destocking to lower premium-baijiu volumes, then models recovery as demand and inventory conditions improve.

• Valuation methodsP/E and PEG Valuation

  P/E multiple valuation against a baijiu peer group.

  Nomura applies 17x 2026F P/E to forecast EPS of CNY5.00, using a discount to the roughly 17.5x peer average.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Luzhou Laojiao (000568.SZ; 000568 CH)

  Primary covered company; expected to recover earnings from 2027F as premium-baijiu volume and selling-expense trends improve.

  Strengths

  National Cellar 1573 brand equity, relatively resilient core-product pricing and high premium-baijiu gross margin.

  Weaknesses

  Earnings adjustment phase, below-peer 2026-28F EPS CAGR and ROE, and near-term volume pressure.

  Comparison

  Assigned 17x 2026F P/E versus a peer-group average of about 17.5x.

  Risks

  Slower macro and consumption recovery, stronger competition, or slower premium-volume recovery.

• Kweichow Moutai (600519 CH)

  Valuation peer.

  Comparison

  Peer trades at 19.5x 2026F P/E versus Luzhou Laojiao at 14.0x.

• Wuliangye (000858 CH)

  Valuation peer.

  Comparison

  Peer trades at 16.9x 2026F P/E.

• Yanghe Distillery (002304 CH), Gujing Distillery (000596 CH), Ying Jia Gongjiu (603198 CH), King's Luck (603369 CH)

  Valuation peers.

  Comparison

  Included in the peer group used to derive the approximately 17.5x average P/E.

Key data

• 1H26 revenueCNY10.47bnDown 36.4% year-on-year
• 1H26 net profitCNY4.34bnDown 43.4% year-on-year
• 2026F revenueCNY18.72bnDown 27.3% year-on-year
• 2026F net profitCNY7.35bnDown 32.1% year-on-year
• 2027F/2028F net profit growth7.9% / 9.9%Expected to outpace revenue growth as selling expenses normalize
• 2026F premium-baijiu volume25.4ktDown 32.0% year-on-year
• Selling expense ratio15.0% / 13.5% / 12.0%2026F/2027F/2028F
• Target valuation17x 2026F P/EApplied to CNY5.00 2026F EPS

Impact & implications

The report expects 2026F to be the trough adjustment year. Recovery depends on premium-baijiu volumes stabilizing, channel inventory easing and promotional spending becoming less necessary, which would allow profit growth to resume from 2027F.

Risks

• A weaker-than-expected macroeconomic and household-consumption recovery could delay business-banquet, gifting and gathering demand, hurting sell-through and revenue.
• Intensifying baijiu competition could require more channel support and promotions, increasing the selling expense ratio and delaying margin recovery.
• A slower recovery in premium-baijiu end-demand or channel destocking could leave volumes below forecast and delay earnings recovery.

What to watch

• Peak-season sell-through.
• Mid- and high-end baijiu sales volumes.
• National Cellar 1573 core-product pricing.
• Channel inventory pressure and the selling expense ratio.