Shenwan Hongyuan Group: Baijiu revenue and profit remain under pressure in 26Q3; the industry is expected to stabilize and improve in 2027

Shenwan Hongyuan Group released a research report stating that in 26Q3, baijiu sector revenue and profit remained under pressure, fundamental pressure accelerated its release, and statement pressure accelerated its clearing. The bank believes that the sector's bottoming characteristics have been verified: 1. The time and magnitude of the sector's adjustment have been relatively sufficient; 2. Stock prices have basically reflected the market's pessimistic expectations; 3. The valuation attractiveness of high-quality individual stocks has clearly increased, dividend yields have reached a relatively high level, and leading enterprises have the ability to maintain stable growth in revenue and profit. From the statement side, most enterprises will continue to release pressure in 26, but the pace and magnitude of adjustment differ, so each enterprise's performance reversal inflection point and elasticity also differ. The bank expects most leading enterprises to complete statement-side clearing in 26, with pressure fully released, and hopes to return to a growth cycle in 27. Looking ahead to 27, as the industry stabilizes, different enterprises will have different alpha in the process of stabilizing and improving, so the performance elasticity and valuation elasticity they demonstrate will also differ significantly. Shenwan Hongyuan Group's main views are as follows: Fundamental analysis: 26Q3 revenue and profit declined year on year, leading enterprises usher in performance reversal 1. In 26Q3, baijiu sector revenue and profit continued to come under pressure, sub-high-end profitability began to recover, and revenue of some regional baijiu gradually turned positive. 26Q3 operating revenue was RMB67.92 billion, down 9.76% year on year; net profit attributable to parent was RMB24.59 billion, down 12.32% year on year. Revenue growth was nationwide famous baijiu > sub-high-end > regional baijiu, and net profit attributable to parent growth was sub-high-end > nationwide famous baijiu > regional baijiu. 2. In 26Q3, baijiu sector profitability diverged, the net margin of the sub-high-end segment rose, and the decline in the net margin of regional baijiu remained relatively large. In the first three quarters of 2026, the baijiu sector's net margin was 38.7%, down 0.8 percentage points year on year, mainly affected by a decline in gross margin and an increase in the selling expense ratio. 26Q3 net margin was 37.3%, down 1.0 percentage point year on year; gross margin rose 0.3 percentage points, but the selling expense ratio rose 1.6 percentage points, and net margin remained under pressure. 3. At the end of 26Q3, the baijiu sector's advance receipts were RMB55.86 billion, a decrease of RMB3.81 billion from the end of 26Q2, compared with an increase of RMB2.15 billion quarter on quarter in the same period last year. Due to channel changes, advance receipts of nationwide famous baijiu declined quarter on quarter, while those of sub-high-end and regional baijiu grew quarter on quarter, with the latter two showing improvement in quarter-on-quarter changes compared with the same period last year. 4. In 26Q3, the baijiu sector's net operating cash flow was RMB27.86 billion, up 30.2% year on year; cash received from sales of goods and provision of services was RMB76.81 billion, down 6.2% year on year, a smaller decline than revenue. Valuation analysis From a valuation perspective, the sector's current valuation remains below the historical center. As of October 30, 2026, the baijiu sector's absolute PE was 21.5x, below the historical daily average of 27.1x since 2011. The baijiu sector's relative PE multiple (relative to the Shanghai Composite Index) was 1.41x, below the historical daily average of 1.96x since 2011. Nationwide baijiu enterprises such as Kweichow Moutai are basically at 15-20x valuation for 27. The bank believes that in 26 the industry is bottoming during a downturn, and starting from 26Q3, the fundamentals of some enterprises have already begun to reverse and return to a growth cycle. In 26, the fundamentals of most companies will bottom, and statement-side performance is at the bottom of a downward cycle. It is expected that in 27 the industry is expected to stabilize, leading baijiu enterprises are all expected to return to a growth cycle, and leading enterprises are expected to see a double boost in valuation and performance. Risk warning: An economic downturn affects overall baijiu demand; food safety issues.