Kweichow Moutai 1Q26 Sales Met Expectations, Net Profit Dragged by Gross Margin Decline; Goldman Sachs Maintains Buy

Overview

This report reviews Kweichow Moutai's 1Q26 results. The company announced its 1Q26 results on April 24, with revenue/net profit attributable to shareholders of Rmb53.9bn/Rmb27.2bn, up 6.3%/1.5% yoy. Sales were broadly in line with Goldman Sachs' expectations, but net profit was below expectations, mainly because net margin fell 2.4 percentage points yoy to 49.8% and gross margin fell 2.2 percentage points yoy. The report believes that a higher Series Spirits mix, suspended shipments of non-standard SKUs to distributors, and price adjustments were important reasons for the gross margin decline.

Core views

Goldman Sachs' core view is that, in the short term, as Moutai shifts from planned distributor shipments toward higher direct sales and i-Moutai allocation, quarterly revenue and profit volatility may increase, especially as 2Q and 4Q are relatively smaller seasons for baijiu consumption. The report forecasts 2Q26 sales/net profit to decline 4%/7% yoy, followed by a recovery in 2H26 to 4%/7% yoy growth in sales/net profit. In the medium to long term, market-oriented reform should help improve direct consumer reach and maintain healthier channel inventory, thereby supporting sustainable growth.

Analysis framework

The report analyzes Kweichow Moutai mainly through quarterly operating data, product revenue breakdown, channel revenue breakdown, advances from customers and operating cash flow, i-Moutai sales volume estimates, wholesale price trends, earnings forecast revisions, and a P/E valuation framework. Goldman Sachs compares actual 1Q26 results with its own forecasts and assesses future growth quality by considering non-standard SKU shipment strategy, Feitian Moutai prices, changes in direct-sales mix, and channel inventory.

Methodology notes

• Valuation methodsP/E target multiple valuation

  The 12-month target price is based on 23.4x 2027E P/E and discounted back to mid-2027 using an 8.5% cost of equity.

  The target P/E references the company's average P/E over the full 2012-2023 cycle; the target price was raised from Rmb1,592 to Rmb1,616, mainly reflecting updated earnings forecasts and an adjustment to the valuation discounting point.

• earnings_revisionEarnings forecast revision

  Revenue forecasts were raised, but profit forecasts were slightly lowered.

  Goldman Sachs raised its 2026E/2027E revenue forecasts by about 2.3%/1.7%, respectively, but lowered its 2026E/2027E net profit attributable to shareholders forecasts by about 2.2%/2.8%, respectively, due to a gross margin cut.

• channel_analysisChannel structure analysis

  Direct sales and i-Moutai allocation replace part of distributor shipments.

  In 1Q26, direct-sales channel revenue grew 27% yoy and accounted for 55% of spirits sales; i-Moutai sales excluding tax were Rmb21.5bn, accounting for about 40% of spirits revenue, while wholesale channel revenue declined 10.9% yoy.

Asset mapping & comparison

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

• 600519.SS

  Research target

  Strengths

  Strong brand demand, significant i-Moutai volume growth, higher direct-sales channel mix, improved operating cash flow, and supportive dividend yield.

  Weaknesses

  1Q26 net profit was below expectations, gross margin and net margin declined, advances from customers fell sharply yoy, and quarterly volatility may increase.

  Comparison

  Compared with Goldman Sachs' expectations, sales were broadly in line but net profit lagged; compared with the previous target price, the new target price was raised from Rmb1,592 to Rmb1,616.

  Risks

  Consumption tax increase, environmental issues, slower-than-expected macro recovery, capacity constraints, and valuation pressure from US interest-rate volatility.

• Feitian Moutai

  Core product and price observation target

  Strengths

  i-Moutai allocation drove end-market sales, and the wholesale price of original-carton Feitian Moutai recently recovered to Rmb1,670.

  Weaknesses

  Changes in channel structure may cause volatility in the timing of quarterly revenue recognition.

  Comparison

  The ratio of Feitian Moutai wholesale price to urban employee wages has fallen to about 28%, below the high of nearly 60% in 2021.

  Risks

  If the recovery in wholesale prices is not sustained, it may affect channel confidence and valuation expectations.

• Non-standard SKUs

  Key variable for margin and channel policy

  Strengths

  Consignment and more disciplined shipments help control channel inventory.

  Weaknesses

  Suspended shipments to distributors and price adjustments in 1Q26 dragged gross margin, and channel profits deteriorated over the past year, especially for 15-year Moutai and Caiyou Zhenpin.

  Comparison

  Compared with the traditional distributor shipment model, the non-standard Moutai consignment model reduces the need for full prepayment.

  Risks

  Price adjustments and channel profit compression may continue to affect short-term revenue, advances from customers, and gross margin.

Key data

• 1Q26 salesRmb53.9bnUp 6.3% yoy, broadly in line with Goldman Sachs' expectations.
• 1Q26 net profit attributable to shareholdersRmb27.2bnUp 1.5% yoy, below Goldman Sachs' expectations, mainly due to a decline in net margin.
• 1Q26 net margin49.8%Down 2.4 percentage points yoy.
• 1Q26 gross margin change-2.2ppt yoyAffected by Series Spirits mix, non-standard SKU price adjustments, and shipment discipline.
• 1Q26 i-Moutai salesRmb21.5bn (excluding tax)Accounted for about 40% of spirits revenue and grew by about 267% yoy.
• 1Q26 direct-sales channel mix55%Up 9 percentage points yoy, mainly driven by increased allocation of Feitian Moutai on i-Moutai.
• 1Q26 wholesale channel revenue change-10.9% yoyRelated to suspended shipments of non-standard SKUs to distributors and price cuts for Series Spirits.
• Advances from customers at end-1Q26Rmb3.0bnDown 66% yoy, reflecting a slower prepayment pace and more sales concentrated in the i-Moutai consignment model.
• Wholesale price of original-carton Feitian MoutaiRmb1,670Recently recovered as of 2026-04-24.
• 2026E sales/net profit growth forecastAbout 3%/2%Adjusted by Goldman Sachs from its previous forecasts of 0.8%/1.4%.
• Target priceRmb1,616Previously Rmb1,592; Buy rating maintained.

Impact & implications

The report's view on investment implications is positive but emphasizes short-term volatility. The profit side is temporarily dragged by gross margin and the channel shift, and 2Q26 may remain under pressure; however, high growth in i-Moutai, a higher direct-sales mix, and recovering wholesale prices indicate that end-market brand demand remains strong. If market-oriented reform leads to healthier channel inventory and more direct consumer reach, long-term growth quality is expected to improve.

Risks

• Potential regulatory changes such as an increase in the consumption tax rate.
• Risks related to environmental pollution.
• Macroeconomic recovery slower than expected.
• Capacity constraints.
• Increased US interest-rate volatility, as Moutai's P/E is negatively correlated with the US 10-year Treasury yield.
• Changes in product mix, non-standard SKU price adjustments, or shipment discipline may continue to pressure gross margin.
• The shift to direct-sales channels may amplify quarterly revenue and profit volatility.

What to watch

• Whether 2Q26 sales and net profit decline 4% and 7% yoy, respectively, as Goldman Sachs expects.
• Whether 2H26 sales and net profit can recover to about 4% and 7% yoy growth.
• Whether i-Moutai allocation pace, transacting users, and sales excluding tax can remain high.
• Whether the wholesale price of original-carton Feitian Moutai can stabilize near Rmb1,670 or continue to recover.
• Non-standard SKU consignment plans, price adjustments, and changes in channel profits.
• Whether advances from customers continue to contract yoy, and the impact of the consignment model on cash flow and revenue recognition.
• Whether 2026E gross margin stabilizes near Goldman Sachs' new forecast of about 90.0%.