Initiating coverage with Buy: RTD recovery, whisky still in cultivation phase

Overview

This report marks Nomura's initiation of coverage on Bairun Shares. Bairun Shares relies on RTD ready-to-drink cocktails as its core revenue base, while strategically developing its whisky and flavors & fragrances businesses. The report believes the company's RTD business will return to growth from 2026, driven by expanded new product offerings, product mix upgrades, and channel diversification; while the whisky business still requires aging and market cultivation, it has the potential to become a second growth curve.

Core views

The core views include: first, RTD remains the company's foundation, and new products are priced above traditional RIO products, so if volume ramps up it will improve the product mix and support ASP; second, new formats such as discount snack retailers, scenario-based consumer positioning, and channel digitalization are expected to open up incremental growth opportunities; third, whisky commercialization is advancing, and China's new whisky standards in 2026 may raise entry barriers, benefiting leading companies with advantages in capacity and aging cask reserves; fourth, the flavors & fragrances business has a stable customer base and is expected to maintain low-single-digit growth and relatively high gross margins.

Analysis framework

The report combines segment forecasting with relative valuation: it first forecasts revenue, growth, and gross margin separately for RTD, whisky, and flavors & fragrances, and then aggregates them into company-level revenue and net profit forecasts; on the valuation side, it uses the P/E method, deriving a target price of CNY19.63 from 2026F EPS of CNY0.70 and a target P/E of 28x, and compares this with the company's 10-year historical median TTM P/E and Wind consensus expectations.

Methodology notes

• Valuation methodPrice-to-earnings method (P/E)

  Derive the target price by multiplying 2026F EPS by the target P/E multiple.

  Nomura assigns Bairun Shares 28x 2026F P/E, about a 40% discount to the company's 10-year historical median TTM P/E of 46x, mainly reflecting slower future earnings growth than during the previous high-growth phase of RTD, as well as pressure on profits from depreciation, marketing, and capacity expansion investment during the early stage of whisky commercialization.

• Operating forecastSegment revenue and gross margin forecast

  Forecast revenue, growth, and gross margin separately for the three major businesses: RTD, whisky, and flavors & fragrances.

  For RTD, the focus is on ramp-up of new products and channel expansion; for whisky, the focus is on retail coverage, brand awareness, and economies of scale; for flavors & fragrances, the focus is on stable customers and supply chain management.

• Relative comparisonWind consensus comparison

  Compare Nomura's forecasts with market consensus to judge how conservative the forecast assumptions are.

  The report states that its 2026-2028F revenue forecasts are 0.7%-1.6% below Wind consensus, and its net profit forecasts are 1.9%-3.0% below consensus, mainly because it is more cautious on the pace of macro consumption recovery and the competitive landscape of RTD.

Asset mapping & comparison

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

• Bairun Shares 002568.SZ / 002568 CH

  The A-share food and beverage company directly covered by the report.

  Strengths

  The RIO brand leads China's RTD market; RTD product matrix upgrade; channels expanding from traditional channels to new formats such as discount snack retailers; the Laizhou distillery has a leading domestic reserve of whisky aging casks; the flavors & fragrances business has a stable customer base and strong profitability.

  Weaknesses

  Growth slowed after the previous high-growth phase of RTD; whisky is still in the early stage of commercialization, with depreciation, marketing, and capacity expansion investment putting short-term pressure on profits; the market is concerned about the long payback period for whisky capacity expansion.

  Comparison

  The benchmark index is CSI 300; Nomura's forecasts are more conservative than Wind consensus, with revenue 0.7%-1.6% lower and net profit 1.9%-3.0% lower.

  Risks

  New product sales below expectations, whisky commercialization below expectations, weak demand recovery, raw material price fluctuations, and food safety incidents.

Key data

• Investment ratingBuyInitiating coverage; the rating is defined as the analyst expecting the stock to outperform the benchmark over the next 12 months.
• Target priceCNY19.63Based on 28x 2026F P/E and 2026F EPS of CNY0.70.
• Implied upside37.3%Calculated based on the report's target price and the current stock price.
• Current valuation20.4x 2026F P/EThe report states that the current share price corresponds to 20.4x 2026F P/E.
• 2026-2028F revenue forecastCNY3,255mn / CNY3,575mn / CNY3,922mnCorresponding to a revenue CAGR of about 10.0%.
• 2026-2028F net profit forecastCNY730mn / CNY826mn / CNY935mnCorresponding to a net profit CAGR of about 13.6%.
• RTD revenue forecastCNY2,638mn / CNY2,849mn / CNY3,049mnCorresponding to YoY growth of 9%/8%/7% in 2026/2027/2028F, with gross margin expected at 69.5%/70.0%/70.5%.
• Whisky revenue forecastCNY229mn / CNY320mn / CNY448mnGross margin is expected at 72.0%/73.0%/74.0% in 2026/2027/2028F.
• Flavors & fragrances revenue forecastCNY333mn / CNY343mn / CNY353mnExpected to maintain low-single-digit growth, with gross margin steady at 71.0%.
• Target P/E28x 2026F P/EAbout a 40% discount to the company's 10-year historical median TTM P/E of 46x.
• Relative performanceUnderperformed CSI 300 by 23.5 percentage points over the past monthAs of June 25, 2026, reflecting weak sentiment in the consumer sector and market concerns about the payback period of whisky capacity expansion.
• Whisky market participants51 entitiesAccording to Jiuyejia, as of mid-2025, there were 51 entities engaged in whisky production and operations in mainland China.
• Whisky retail coverage31 provinces, tens of thousands of terminalsIn 2025, Bairun completed the first phase of spirits retail rollout.

Impact & implications

The report reaches a clearly positive conclusion on Bairun Shares, but the upside thesis does not rely solely on valuation recovery; rather, it depends on RTD revenue re-entering a growth trajectory in 2026 and on whether whisky can validate commercialization through channel expansion and brand cultivation. Near-term catalysts are mainly RTD revenue outperforming expectations in the second and third quarters of 2026 and accelerating whisky retail coverage; major pressures come from the pace of consumption recovery, the competitive landscape, capacity expansion capex, and food safety risks.

Risks

• New product sales below expectations: if new products such as RIO Relax and jelly-style RTD fail to gain sufficient consumer acceptance, have weak channel sell-through, or cannibalize older products, they may drag on revenue contribution and the return on marketing investment.
• Whisky commercialization below expectations: consumer awareness and terminal sell-through validation require time; if long-term sell-through remains below expectations or brand awareness improves slowly, whisky revenue contribution and returns on capital investment may fall short of expectations.
• Demand recovery below expectations: RTD and spirits consumption is linked to consumer confidence and the macro cycle; if the recovery slows or competition in low-alcohol beverages worsens, RTD growth and whisky volume ramp-up may be delayed.
• Raw material price fluctuations: prices of oak barrels, glass bottles, aluminum cans, and other raw and auxiliary materials are affected by supply and demand, global commodities, and exchange rates; if increases exceed expectations, gross margin and net profit will be squeezed.
• Food safety risk: if quality control issues arise in the production, storage, transportation, or sales of RTD and whisky, brand reputation may be damaged and market share could be lost rapidly.

What to watch

• Whether RTD revenue outperforms expectations in the second and third quarters of 2026.
• Terminal sell-through, repurchase rates, and the substitution effect on older products of new offerings such as RIO Relax and jelly-style RTD.
• Expansion progress in new channels such as discount snack retailers and the effectiveness of channel digitalization.
• The speed at which whisky retail coverage continues to expand beyond 31 provinces and tens of thousands of outlets.
• The impact of China's new whisky standards in 2026 on industry barriers and the competitive landscape after implementation.
• Capex, depreciation pressure, and payback period of the proposed private placement and whisky aging cask expansion project.
• Macro consumption recovery, competition in low-alcohol beverages, raw material prices, and food safety management.