In-depth Analysis of the Baijiu Industry's 'Volume Control and Price Protection' Strategy and Valuation Support

According to the latest data, China’s consumer sector faces severe challenges:

• Social retail sales growth hit the lowest level since 2023
  : only 1.3%, indicating extremely weak consumer demand
• Industrial value-added growth slowed
  : down to 4.8%, manufacturing momentum weakened
• Durable goods consumption dropped sharply
  : auto category down 8.3%, building materials down 17.0%, furniture down 3.8%, home appliances down 19.4%[1]

This overall weakness in the consumer sector directly affects the market demand for optional consumer goods like baijiu.

Notably, the main uptrend of A-shares has diverged significantly from the real economy since June, mainly supported by policy expectations[2]. This divergence is particularly prominent in the baijiu sector.

Data shows the baijiu industry presents obvious polarization:

• High-end baijiu hit hard
  : cumulative revenue from Jan-Nov down 6.2%, Nov single month down 13.0%
• Mid-low end baijiu performed relatively stable
  : less affected by consumption downgrade

This differentiation reflects the difference in risk resistance between products of different price segments.

According to the latest market data[0]:

:

• Current stock price: 1,433.10 yuan (+0.78%)
• YTD return: -14.95%
• Market cap: 1.80 trillion yuan
• P/E ratio:19.96x
• Max drawdown:28.76%
• Annualized volatility:23.11%

:

• Current stock price:113.40 yuan (+0.35%)
• YTD return:-16.62%
• Market cap:4401.6 billion yuan
• P/E ratio:13.47x
• Max drawdown:34.36%
• Annualized volatility:28.24%

###2.3 Limitations of the ‘Volume Control and Price Protection’ Strategy

International experience shows that the ‘volume control and price protection’ strategy faces severe challenges in economic downturn cycles:

:

• Q1 FY26 net sales down2.2%
• China baijiu business dropped sharply, dragging down group net sales by about 2.5 percentage points
• Volume up but price down trend obvious: sales volume +2.9%, but price/mix impact -2.8%[1]

:

• China market sales continue to decline
• Expected full-year operating profit to see organic decline from low double digits to mid double digits[2]

##3. In-depth Evaluation of Valuation Support Capability

###3.1 DCF Valuation Analysis

:

• Conservative scenario:1,088.32 yuan (-24.1%)
• Base scenario:1,576.71 yuan (+10.0%)
• Optimistic scenario:2,564.80 yuan (+79.0%)
• Probability-weighted value:1,743.28 yuan (+21.6%)

:

• Conservative scenario:129.41 yuan (+14.1%)
• Base scenario:155.75 yuan (+37.3%)
• Optimistic scenario:211.25 yuan (+86.3%)
• Probability-weighted value:165.47 yuan (+45.9%)

###3.2 Key Valuation Risk Factors

:

• Moutai’s base assumption of20% revenue growth, but current Nov single month down 13.0%
• Wuliangye’s base assumption of11.7% growth, but facing consumption downgrade pressure

:

• Moutai’s base EBITDA margin of 79.1% may come under pressure under ‘volume control and price protection’ stress
• Cost rigidity may further compress profit margins

##4. Investment Strategy Recommendations

###4.1 Risk Control Priority Principle

:

• In policy expectation-driven market conditions, it is recommended that the total position in the baijiu sector does not exceed15-20% of the portfolio
• High-end baijiu positions should be controlled within 8-10%

:

• Moutai: Set stop-loss in the range of1,200-1,300 yuan
• Wuliangye: Set stop-loss in the range of 100-105 yuan

###4.2 Structural Allocation Recommendations

:

• Focus on enterprises with abundant cash flow and low debt risk[0]
• Prefer companies with ROE above 20% and stable gross profit margins

:

• Central Economic Work Conference proposed ‘special actions’ to boost consumption[2]
• Short-term trading opportunities brought by possible policy shifts

###4.3 Time Window Grasp

:

• Be cautious and wait, pay attention to policy implementation after the December Central Economic Work Conference
• Focus on the intensity and targeting of consumption stimulus policies

:

• If policy effects appear, consider buying quality leaders at low prices
• But need to wait for fundamental confirmation of improvement signals

:

• Pay attention to concentration improvement opportunities brought by industry integration
• Prefer leading enterprises with brand moats and channel advantages

##5. Conclusion and Outlook

The current ‘volume control and price protection’ strategy of the baijiu industry has limited support under the background of continued macroeconomic weakness. Although leading enterprises have a certain valuation safety margin, they face the following core challenges:

1. Consumption downgrade trend is hard to reverse
   : mid-high end baijiu demand may be under long-term pressure
2. There is a time lag between policy expectations and actual effects
   : stock market rise lacks fundamental support
3. Industry differentiation will continue
   : only top enterprises can maintain relatively stable performance

: In the current environment, investors should remain cautious, take risk control as the primary goal, gradually reduce positions in policy expectation-driven rebounds, and wait for clearer macroeconomic improvement signals before considering increasing allocation. The baijiu sector is more suitable as a tactical allocation rather than a strategic position.

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[0] Jinling API Data - Real-time stock prices, financial data and DCF valuation analysis
[1] Diageo Q1 FY26 financial report data, showing China baijiu market decline dragging down global performance
[2] Reuters News - Remy Cointreau’s assessment of China market performance
[3] New York Times - China investment data hits30-year low, reflecting deep economic adjustment
[4] CNBC Report - Consumer stocks turn negative annually, inflation continues to suppress consumption
[5] Hong Kong Stock Market Analysis - Policy expectations and market reactions of the Central Economic Work Conference