In the first quarter of 2025, the revenue of the Baijiu Industry was 153.36 billion yuan, a year-on-year increase of 1.8%. Baijiu companies have steadily passed the Spring Festival and are expected to experience an upward trend thereafter.
According to Zheshang, the Research Reports indicate that in Q1 2025, the revenue of the Baijiu Industry was 153.36 billion yuan, a year-on-year increase of 1.8%, with Baijiu companies smoothly navigating the Spring Festival, and there is hope for an upward trend thereafter.
Zheshang's main viewpoints are as follows:
In Q1 2025, the revenue performance of liquor companies stabilized, with strong resilience from high-end leaders and regional leaders.
In Q1 2025, liquor companies' revenue performance stabilized, achieving robust growth, with the concentration accelerating towards high-end and regional leading liquor companies. In 2024, the Baijiu industry's revenue is expected to grow by 7.7% year-on-year to 441.77 billion yuan, a slowdown compared to 2023; in Q1 2025, the Baijiu industry's revenue was 153.36 billion yuan, reflecting a year-on-year increase of 1.8%, with Baijiu companies successfully navigating the Spring Festival, and there is hope for an upward trend thereafter.
By price tier: 1) FY24 revenue growth rate: high-end liquor (+11.5%) > mid-range liquor (+2.6%) > regional leading liquor (+0.8%) > third and fourth tier liquor (-4.0%); 2) Q1 2025 revenue growth rate: high-end liquor (+8.0%) > mid-range liquor (+2.8%) > third and fourth tier liquor (-11.3%) > regional leading liquor (-12.6%).
Strong resilience from high-end liquor and upgrade among the general public contribute to the increase in gross margin, while the rise in expense ratio leads to slight fluctuations in net margin.
Profitability: The resilience of high-end products combined with the continuous upgrade of the mass product structure drives an increase in gross margin, although in 2024, the net margin may slightly decline due to expenses. The gross margin of the Baijiu industry in 2024/25Q1 increased year-on-year by 0.75/0.29 percentage points to 81.82%/81.50%. The year-on-year changes in gross margin for liquor companies in 25Q1 are as follows: low tier liquor (+1.81pct) > mid-tier liquor (+0.97pct) > regional leading liquor (-0.13pct) > high-end liquor (-0.66pct); the year-on-year changes in net margin for liquor companies in 25Q1 are: high-end liquor (+0.18pct) > mid-tier liquor (-0.26pct) > low tier liquor (-1.13pct) > regional leading liquor (-2.54pct).
Expense Ratio: In 2024 and 25Q1, the sales expense ratio of liquor companies increased year-on-year by 0.16/0.30 percentage points, while the management expense ratio decreased year-on-year by 0.36/-0.30 percentage points. During the industry adjustment phase, companies maintained their overall strength in spending to maintain market share, but the structure and direction of investment increasingly focus on the consumer level and enhance channel expansion and control.
The current situation may represent the bottom range of the Baijiu industry, highlighting the value of high dividend allocation.
Zheshang believes that there are the following focus points for the Baijiu industry in 2024 and 25Q1: 1) Since the second half of 2024, liquor companies have generally reduced speed, indicating a potential bottom range for the Baijiu industry; 2) Trends towards centralization and differentiation are intensifying, showcasing strong resilience among leading liquor companies; 3) Decreasing contract liabilities coupled with increasing sales expense ratios, focusing on C-end while lightening channels; 4) 14 liquor companies have increased their dividend payout ratios, as dividend yields present high cost-performance; currently, liquor companies expected to exceed a 4% dividend yield in 2025 include Jiangsu Yanghe Brewery Joint-Stock, Luzhou Laojiao, Wuliangye Yibin, and Anhui Gujing Distillery.
Investment advice.
The Baijiu sector is currently still at a low point, possibly within the bottom range of this adjustment cycle; continuous recommendations for strong brands with robust momentum, earlier inventory clearance, and reasonable target growth rates for liquor companies.
Currently, increasing external uncertainties such as tariffs highlight the consumer allocation value represented by Baijiu. With policies and real estate stabilization catalyzing, the Baijiu structure may welcome a bull market, focusing on two main lines: ① Certainty of ongoing momentum: high-end liquor recommendations include Kweichow Moutai (600519.SH)/Wuliangye Yibin (000858.SZ), mid-tier and regional liquor recommendations include Anhui Gujing Distillery (000596.SZ)/Shanxi Xinghuacun Fen Wine Factory (600809.SH)/Jiangsu King's Luck Brewery Joint-Stock (603369.SH)/Anhui Yingjia Distillery (603198.SH); ② Elasticity of recovery from a low base: high-end liquor recommendation includes Luzhou Laojiao (000568.SZ), mid-tier and regional liquor recommendations include Sichuan Swellfun (600779.SH)/Hebei Hengshui Laobaigan Liquor (600559.SH).
Risk Warning
1. The economic recovery is not as expected; 2. The price increase of high-end liquor is not as expected.
