Accelerated destocking and healthier inventories, but awaiting clear/broad-based demand recovery; Upgrade King’s Luck/Guijing to Buy on risk/reward

Research evidence excerpt

Accelerated destocking and healthier inventories, but awaiting clear/broad-based demand recovery; Upgrade King’s Luck/Guijing to Buy on risk/reward

Equity Research

23 June 2026 | 9:32PM HKT

CHINA SPIRITS

Accelerated destocking and healthier inventories, but awaiting

clear/broad-based demand recovery; Upgrade King’s Luck/Gujing to

Buy on risk/reward

Since our spirits sector downgrade on 10 July 2025, the CSI liquor index has been Leaf Liu

+852-3966-4169 | leaf.liu@gs.com

down -30%, underperforming MSCI Consumer Staples at -18%, due to concerns over Goldman Sachs (Asia) L.L.C.

anti-graft policy impacts, industry-wide destocking risks, and a slow recovery in Christina Liu

demand amid weak macro environment. While we acknowledge that some structural +852-2978-6983Goldman Sachs (Asia)| christina.liu@gs.comL.L.C.

challenges likely remain (i.e. lack of strong recovery in commercial demand under Valerie Zhou

weak macro/FAI backdrop, amid continued reduction in per cap spirits +852-2978-0820Goldman Sachs (Asia)| valerie.zhou@gs.comL.L.C.

consumption), we believe the worst is behind us for spirits sector, with an

acceleration in supply cuts, stabilization of wholesale prices for key upper mid end

spirits with healthier channel inventories, as well as healthier cash flows. We also see

tactical cyclical opportunities particularly in oversold regional names, where

balance sheets and regional demand are already showing early signs of improvement

ahead of earnings recovery. We upgrade Gujing/King’s Luck to Buy from

Sell/Neutral on bottoming and attractive risk reward (with yield support).

Where we are in the cycle – still at an early stage of recovery but with signals of

stabilization:

1) S/D dynamics: acceleration in supply cuts has been observed this year, from small