J.P. Morgan: Wuliangye’s destocking deepens as JPMorgan cuts earnings forecasts and price target

What does the third-quarter decline indicate?

In the third quarter of 2026, Wuliangye’s gross sales fell 38% year on year to 4.44 billion yuan, a wider decline than the 13% recorded in the second quarter. Net profit fell 48% year on year to 958 million yuan. The third quarter is usually a strong season for baijiu sales.
Year-on-year gross sales growth in the first three quarters was 34%, -13% and -38%, respectively. JPMorgan believes shipments may have been excessive in the first quarter and end demand fell short of expectations; the company is undertaking a deeper channel cleanup.
Gross margin calculated on gross sales rose 8.6 percentage points year on year to 77.3% in the third quarter, which the bank believes may have been helped by changes in the product mix and stabilizing wholesale and ex-factory prices. However, selling expenses rose 20% year on year to 1.5 billion yuan, potentially reflecting more tasting events and dealer incentives. Operating margin fell to 16.2%, well below the approximately 40% level before destocking. Operating cash flow was only close to breakeven in the first three quarters.

By late October, Wuliangye’s wholesale price had recovered to about 750 yuan from a low of approximately 730 yuan at the end of June. JPMorgan believes this shows some progress in the channel, but the recovery remains at an early stage.
The bank’s dealer survey indicates that retail sell-through during the Mid-Autumn Festival and National Day holidays may have fallen about 15% year on year; the weak macroeconomic environment and tighter regulation in some regions continue to affect business consumption.
Channel inventory remains unclear. The bank expects destocking and higher marketing support to continue over the next few quarters and believes sales will struggle to return to positive growth in the near term unless wholesale prices recover significantly.

JPMorgan cut its net profit forecasts for 2026 and 2027 by 14.2% and 11.6%, respectively, to 10.755 billion yuan and 13.307 billion yuan. In its model, the 2026 sales volume forecast for premium liquor was cut 14.3% from its previous estimate, while the forecast for series liquor was unchanged.
The bank forecasts that fourth-quarter 2026 gross sales and net profit will fall approximately 28% and 58% year on year, respectively. Its full-year net profit forecast is about 26% below the Bloomberg consensus of 14.531 billion yuan.

The company has pledged a dividend for 2026 of at least 20 billion yuan, or 5.15 yuan per share; on the report’s basis, the dividend yield exceeds 7%. JPMorgan estimates the company will still have about 110 billion yuan in net cash after payment, but it has yet to announce its dividend policy for 2027.
The company launched a 8 billion–10 billion yuan buyback program in May and had repurchased only 1.2 billion yuan by the end of September. The bank believes shareholder returns can provide some support for valuation, but are insufficient to address concerns about earnings visibility and trust in financial reporting.
JPMorgan maintained its underweight rating and lowered its June 2027 price target from 58 yuan to 51 yuan, mainly because of the cuts to its earnings forecasts. Its valuation still uses a 2027 forecast price-to-earnings multiple of 15 times. The bank also identified better-than-expected Lunar New Year sell-through as an upside factor.