China Baijiu Earnings: Robust Demand and Cost Efficiency Drive Strong Growth of Mainstream Baijiu

Despite still-sluggish consumer sentiment in China, demand for mainstream-focused leading baijiu brands remains robust. Anhui Gujing and Anhui Yingjia both posted strong 2023 and first-quarter 2024 results, with net profits slightly ahead of our expectations on accelerating mix upgrades and optimized costs. We believe Gujing’s and Yingjia’s leadership in their home market of Anhui province positioned the two companies well as the key beneficiaries of increased travelling and socializing, as well as the stronger local economy. These will continue to drive a robust demand and premiumization trend for baijiu sales, while improving cost efficiency will further boost margins.