Goldman Sachs Maintains Luzhou Laojiao at Neutral; Target Price Cut to Rmb98

Overview

Goldman Sachs comments on Luzhou Laojiao's 4Q25/1Q26 earnings. The company reported results on April 29, with revenue and net profit declining by approximately 18% and 14% YoY respectively due to supply controls, broadly meeting Goldman Sachs' expectations. The report focuses on channel health, end-consumer investment, product mix, and regional strategy, noting that the company remains in a phase of weak demand and channel adjustment in the near term.

Core views

Core views are: First, momentum for core products in 2025/1Q26 was weaker than expected, with declines across Guojiao 1573 as well as mid- and low-end products to varying degrees; second, management will continue to support wholesale prices through disciplined inventory management and end-consumer investment, linking quota allocation to bottle-opening and case-opening rates to better align sell-in with sell-through; third, the 2026 recovery is expected to be sequential, potentially becoming more pronounced after 3Q; fourth, following downward revisions to earnings forecasts and the target price, the risk-reward profile remains insufficient to warrant a more positive rating, hence maintaining Neutral.

Analysis framework

The report re-evaluates revenue, net profit, EPS, valuation multiples, and the target price by integrating disclosed earnings, analyst meeting minutes, product line sales trends, regional demand variations, channel inventory levels, and wholesale pricing strategies. Valuation is based on 2027E P/E discounted back to end-2026.

Methodology notes

• Valuation methodsP/E Valuation Method

  Based on 2027E P/E and discounted

  The 12-month target price of Rmb98 is based on 15.7x 2027E P/E, discounted to end-2026 using an 8.3% cost of equity.

• Factor FrameworkGS Factor Profile

  Comparison of growth, financial returns, valuation multiples, and composite factors

  The Goldman Sachs Factor Profile compares the company against the market and industry peers using metrics including sales, EBITDA, and EPS growth; ROE, ROCE, and CROCI; as well as valuation indicators such as P/E, P/B, and dividend-related metrics.

• M&A AssessmentM&A Rank

  M&A probability score

  The report discloses Luzhou Laojiao's M&A Rank as 3, indicating a low probability of acquisition, which is typically not incorporated into the target price.

Asset mapping & comparison

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

• Luzhou Laojiao 000568.SZ

  Covered Company

  Strengths

  Strong foundation as a high-end baijiu brand; good acceptance of lower-ABV Guojiao in select regions; relative stability in key regions including Sichuan, Chongqing, and North China; supportive dividend yield.

  Weaknesses

  Declining sales of core products in 2025/1Q26; revenue drag from supply controls; persistently weak consumer sentiment; greater pressure in certain high-ABV product regions and non-core markets.

  Comparison

  Company rating relative to Goldman Sachs' coverage of Chinese consumer staples and baijiu peers, including Kweichow Moutai, Wuliangye Yibin, and Jiangsu Yanghe.

  Risks

  Prolonged policy impact on banquet consumption; greater-than-expected negative impact of wholesale price movements on ASP; slower-than-expected product cultivation.

Key data

• 12-Month Target PriceRmb98.00Cut from previous Rmb119.
• Current Share PriceRmb100.10Closing price as of April 30, 2026.
• Expected Downside2.1%Based on target price vs. current price.
• 2026E RevenueRmb22,979.7mnNew forecast implies 11% YoY decline; cut by 18.2% vs. prior forecast.
• 2026E Net Profit Attributable to ParentRmb9,264mnCut by 19.5% vs. prior forecast.
• 2026E EPSRmb6.29Cut by 19.5% vs. prior forecast of Rmb7.82.
• 2027E RevenueRmb24,475.0mnCut by 18.0% vs. prior forecast.
• 2027E EPSRmb6.73Cut by 18.3% vs. prior forecast of Rmb8.24.
• 2026/2027E P/E15.9x / 14.9xSummarized as approx. 16x/15x in the report body.
• 2026E Dividend Yield4.8%Company committed to dividends of no less than Rmb8.5bn for 2024-2026.
• High-End Product QR Scan Rate40%+Approx. 50% for lower-ABV Guojiao; approx. 50%-60% for other SKUs.

Impact & implications

The cuts to the target price and earnings forecasts reflect Goldman Sachs' increased caution regarding core product momentum and the impact of supply controls. Near-term investment implications are neutral: channel destocking and end-consumer investment should support medium-term recovery, but demand recovery will take time, and the stock lacks upside relative to the target price. Improvements in sell-through, wholesale prices, and QR scan/bottle-opening data post-3Q could serve as key triggers for reassessing the pace of earnings recovery.

Risks

• Policy impact on banquet consumption lasting longer than expected.
• Greater-than-expected negative impact of wholesale price evolution on average selling prices.
• Continued weaker-than-expected momentum in core products.
• Slower-than-expected revenue recovery pace due to supply controls.
• Less-than-expected effectiveness of channel inventory destocking and end-consumer investment.

What to watch

• Whether sell-through recovery becomes more evident from 3Q onwards.
• Whether the sales divergence between high-ABV and low-ABV Guojiao 1573 narrows.
• Whether bottle-opening rates, case-opening rates, and QR scan rates continue to improve.
• Stability of wholesale prices and the extent of pass-through to ASP.
• Recovery pace in key regions including Sichuan, Chongqing, North China, and the Pan-Taihu region.
• Delivery on 2026-2027 revenue, EPS, and dividend commitments.