Wuliangye’s third-quarter net profit falls 48% as higher gross margin fails to offset expense pressure

Where did third-quarter results disappoint?

Wuliangye’s net profit for the third quarter of 2026 was 958 million yuan, down 48% year over year and significantly below Citi and market expectations.
Third-quarter revenue was 4.4 billion yuan, down 38% year over year based on restated figures for the prior-year period and down 20% quarter over quarter. By comparison, revenue rose 34% year over year in the first quarter and fell 13% in the second.
The company attributed the revenue decline to weak market demand and lower sales volumes. Citi said the company continued to reduce shipments to distributors ahead of the peak Mid-Autumn Festival season, reflecting weak baijiu demand.

At the end of the third quarter, contract liabilities, or distributor prepayments, fell 15% quarter over quarter to 8.9 billion yuan.
Operating cash flow for the first three quarters fell 99.8% year over year, dropping to 47 million yuan from 28.247 billion yuan in the same period a year earlier.
Other current liabilities fell by 580 million yuan quarter over quarter in the third quarter, equivalent to 13% of the quarter’s revenue, down from 35% in the second quarter. This item includes payments owed to distributors for regulated products.

Third-quarter operating costs fell 55% year over year, and gross margin before taxes and surcharges rose 8.6 percentage points to 77.3%. Citi noted that some revenue came from the release of regulated products, which are recorded at cost.
Selling expenses increased 20% year over year, and their share of revenue rose 15.9 percentage points to 33.2%. Although administrative and R&D expenses fell 15% year over year, their ratio to revenue still rose 3.5 percentage points to 13.3% as revenue contracted.
Expense pressure offset the improvement in gross margin: third-quarter earnings before interest and taxes fell 58% year over year, and the EBIT margin declined 7.7 percentage points to 16.2%.

Citi maintained its sell rating with a target price of 61.3 yuan, equivalent to 14 times its expected 2027 earnings. The bank expects continued operational uncertainty for Wuliangye from 2026 to 2027, so its target price-to-earnings multiple is discounted by about 40% relative to the target multiple it assigns to Moutai.
As of the end of the third quarter, the company had spent 1.2 billion yuan to repurchase 16.1 million shares, representing 0.42% of its total share capital, under its 8 billion-to-10 billion-yuan share repurchase and cancellation plan.