Jiugui Earnings: Demand Headwinds Persist Despite Sequential Improvement in Earnings Growth

Narrow-moat Jiugui’s second-quarter results were in line with preliminary guidance and continued to reveal greater sales pressure on subpremium baijiu. Revenue fell 13% year over year, and net profit decreased 61%. Although the performance improved slightly on a sequential basis, our channel check indicates that Jiugui’s inventory level remains high, with distributor inventory at three to four months. This suggests demand headwinds persist. We maintain our earnings forecasts and CNY 68 fair value estimate. We think the shares are currently undervalued, but near-term demand recovery remains uncertain amid slower economic growth and soft consumer sentiment in China.