Moutai 1Q26 Earnings Turn Positive; Maintain Buy Rating with TP of RMB 1,732

Overview

HSBC Qianhai Securities released an earnings review report on Kweichow Moutai for 1Q26. In 1Q26, Moutai's revenue grew 6.3% and net profit grew 1.5%, marking a significant recovery from the double-digit declines in 4Q25, in line with analyst expectations. The report maintains a Buy rating and a target price of RMB 1,732, expecting Moutai's earnings to return to positive growth in 2026, outperforming the overall baijiu industry.

Core views

1Q26 earnings growth turned positive. Revenue reached RMB 54.7bn (+6.3%) and net profit RMB 27.2bn (+1.5%) in 1Q, compared to a 19% revenue decline and 30% net profit decline in 4Q25, indicating a clear recovery in growth momentum. By product, Moutai Liquor grew approx. 6%, while Series Liquor rebounded 12% (vs. a c.10% decline in 2025), signaling substantive progress in destocking. Channel structure continued to optimize. Direct sales channels grew 27%, while wholesale channels declined 11%; the share of direct sales increased by 9ppt to 55%. Notably, sales via the i-Moutai platform surged 267%, becoming the primary driver of direct sales growth. However, net margin contracted by 2.4ppt, mainly due to a 2.2ppt drop in gross margin caused by an unfavorable product mix shift. Full-year outlook remains positive. Analysts forecast FY2026 revenue and net profit growth of approx. 4%, outperforming the baijiu industry (which may face another year of earnings decline). Sequential quarterly improvements are expected throughout the year, supported by stabilizing wholesale prices, ongoing destocking efforts, and an increasing share of direct sales channels.

Analysis framework

Analysts used a Discounted Cash Flow (DCF) model for valuation, with key assumptions including WACC of 9.1%, terminal growth rate of 4.0%, risk-free rate of 4.25%, equity risk premium of 4.75%, and Beta of 1.03. The valuation logic involves forecasting future free cash flows, discounting them to present value, and adding terminal value to derive equity value. Analytically, the report breaks down performance changes across three dimensions: product (Moutai Liquor vs. Series Liquor), channel (direct sales vs. wholesale), and financials (revenue, profit, margins), while assessing relative competitive advantages in the context of the industry's destocking cycle.

Methodology notes

• Valuation MethodDiscounted Cash Flow (DCF)

  DCF Model

  Derives enterprise value by forecasting future free cash flows and discounting them using the Weighted Average Cost of Capital (WACC), plus terminal value. This report assumes a WACC of 9.1% and a terminal growth rate of 4.0%, a common approach for valuing leading baijiu companies.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Baijiu Industry Destocking Cycle Analysis

  The report focuses on destocking progress in Series Liquor (1Q26 rebound of 12% vs. 10% decline in 2025), using inventory cycles to identify industry inflection points—a standard method for analyzing cyclical consumer goods.

• Industry/Sector Analysis FrameworkValue Chain Transmission

  Channel Structure Analysis (Direct Sales vs. Wholesale)

  The report dissects performance divergence between direct sales (+27%) and wholesale (-11%) channels to analyze the impact of channel transformation on margins and pricing power, a typical framework for consumer goods channel analysis.

Asset mapping & comparison

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

• Kweichow Moutai (600519.SS)

  Directly covered stock; maintain Buy rating

  Strengths

  Rapid growth in direct sales channels, strong performance of i-Moutai platform, significant destocking progress in Series Liquor, solidified industry leadership

  Weaknesses

  Net margin pressure (due to unfavorable product mix shift), decline in wholesale channels, 2.2ppt drop in gross margin

  Comparison

  Valuation is higher than Wuliangye (PE 17.7x) and Luzhou Laojiao (PE 15.6x), but ROE of 33.6% is significantly above peers

  Risks

  Decline in wholesale prices, slower destocking, macroeconomic slowdown, policy risks, shifts in consumer preferences

Key data

• 1Q26 Revenue YoY+6.3%Significant improvement vs. -19% in 4Q25
• 1Q26 Net Profit YoY+1.5%Turned positive vs. -30% in 4Q25
• Direct Sales Channel Share55%Increased by 9ppt
• i-Moutai Sales Growth+267%Primary driver of direct sales growth
• 2026E Revenue Growthc.4%Expected to outperform industry
• Target PriceRMB 1,732Implies approx. 19% upside
• 2026E PE21.3xBased on EPS of RMB 68.45
• 2026E Dividend Yield3.7%Stable dividend returns

Impact & implications

The report suggests that Moutai's return to positive earnings growth in 2026 will solidify its leadership in the baijiu industry, while a higher direct sales mix should enhance pricing power and margin stability. Against a backdrop where the broader industry may face earnings headwinds, Moutai's relative advantages are expected to become more pronounced. The target price of RMB 1,732 implies approx. 19% upside, reflecting analysts' confidence in the company's long-term competitiveness.

Risks

• Decline in wholesale prices
• Slower destocking in baijiu industry
• Macroeconomic slowdown
• Adverse regulatory/policy changes
• Shifts in consumer preferences
• Food safety risks
• Patent protection risks

What to watch

• Recovery in wholesale prices
• Upside surprises in baijiu sales
• Pace of baijiu demand recovery
• Introduction of macro stimulus policies
• Progress in market-oriented transformation