2Q受向DTC业务模式转型扭曲；2H增长将提速

2OdistortedbybizmodelpivottowardsDTC:2Hgrowthtoaccelerate CITI'STAKE Moutai'sseeminglyweak2Qsales/NP(-5%/-7%YoY)werelargelydistorted by itsbizmodel pivottowardsDTC(whichamplifies seasonal salesvolatilityespeciallyinthelowestseasonof2Q),inourview.Consideringits2nd-roundASPhikeby7-8%(effectivefromJul 18),webelievethatMoutaiwasincentivizedtoshiftsomeinventorysupplyfrom2Qto3Q(inwhichtheMid-AutumnFestivalfall).Lookinginto2H,weexpectitssalestore-accelerate(onbothenlargedvol&liftedASP)withsequentiallyimprovedEBITmarginin3Q,beforethekick-inof4Qlowcompbase(4Q25sales:-19%YoY).WiththeexitofHuijin（汇金）andCSF（证金）（i.e.，twoinvestmentarmsoftheCentral Govt)fromitstop10 shareholders in2Q,wealsobelieveinvestorssentiments on Moutai have troughed.We identify six positives on Moutaiand reiterateBuy rating. Price (14Aug 2615:00) see6positives inMoutai:(1)Reported2Qsalesweakness was duetophasingofchannel transition (fromwholesale to DTC),rather than soft demand.Directretail/wholesaleaccountedfor60%/38%of2Q26sales(vs42%/55%in2Q25).Itssales under both DTC and new consignment model (with distributors)will berecognizeduponsell-throughtoconsumers (ratherthanshipmenttodistributorsunderoldwholesalemodel);(2)Someinventorysupplylikelyshiftedfrom2Qto3Qtocapturefull benefitof2nd-roundAsPhikeeffectivefromJuly18(seeourJuly19note:PositiveSurprisefromSecond RoundofASPHikes in2026).(3)SequentiallynarrowedYoYGPMdeclinein2Q(-1.2pptYoY,vs-2.2pptYoYin1Q26),givenbenefitfrom1st-roundASPhike;(4)1Hoperating CF soared4.4xYoY (due to normalizedactivitiesofitscaptivefinancecompany),whichmightimplyitspreparationformorecash return to shareholders in 2H;(5)Likelytroughed sentiments of institutionalinvestors,giventheexitofHuijinandCSFfrom itstop10shareholders in2Q;(6)Tobenefitfrominvestor'srotationbacktoChinaconsumersector.Perrecentinvestorfeedback,investors (especially global long-only investors)have recently rotatedback into the China consumer sectorina cautiouslyoptimistic and defensivefashion,withabiastowardshigh-qualitylarge-capconsumerstaples(seeourAug13note:China Consumer-InvestorFeedback&SectorViews BeforePeak of 1HReporting Season). Seedetailed analysisofMoutai's2Q26results,recent twoASPhikes and its latest1st-tierwholesaleASPtrend overleaf. Xiaopo Wei,CFAAC+852-2501-2472xiaopo.wei@citi.com Vincent Young+852-2501-2738vincent.young@citi.com 2Q results distorted by sales pivottowards DTC 2Q26sales group revenue (up17.5ppts YoY, vs 42.4% in2Q25).Salesfromthe iMoutaiplatformsoared2.8xYoYtoRmb18.7bnin2Q26,representing83%ofdirectretail sales(vs29%in2Q25).Wholesaletodistributorsdeclined35%YoYtoRmb14.3bn in2Q26(vs.11% YoY decline in 1Q26). In2Q26,Moutai-brandedsalesdeclined1%YoYtoRmb31.7bn(vs+6%in1Q26)andsub-brandsalesdeclined25%YoYtoRmb5.1bn (vs.+12%in1Q26). 1H26 GP margins In 1H26,group GPM declined1.7ppts to 89.7% (wholesale:-4.5ppts YoY to 85.0%directretail:-0.6pptYoYto92.9%;Moutai-brand:-1.6pptYoYto92.3%;sub-brands:-4.0pptsto73.6%),despitefavorablechannelmixtowardsdirectretail. Inourview,thiswascontributabletoitsunfavorablesalesmixinMoutai-brandedproducts (i.e.,YoY higher sales %from standard Moutai FeitianandYoYlower sales%from itshigher-margin Moutai Vintageproducts).This resulted from its shift of &consignmentmodel (whosesales arerecognizeduponconsumers'purchase,ratherthan shipmenttodistributors previously),in Citi's understanding. 2Q26GP/0Pmargins 2Q26.ItsYoYGPMdeclinesequentiallynarrowedin2Qvs1Q(-2.2pptsYoY),partlythanks to its first-round of 8.6% ex-factory ASP hike effective from Mar 31.GPmargin(afterbusinesstaxandsurcharges)declined1.2pptYoYto72.3%in2Q26. YoY).In1H26,advertisingexpensesdeclined24%YoYtoRmb551mwhilepromotionexpensesgrew2%YoYtoRmb2.3bn.Adminexpensestosalesrose29bpts YoYto4.9% in2Q26. Dueto GPMcontraction,itsEBITmargin contracted 1.3ppt YoYto63.2%andEBITdeclined7%YoYtoRmb23.7bnin2Q26. Operatingcashflow&B/S Its operating cash inflow grew9.2xYoY toRmb43.8bn in2Q26and 4.4xYoYtooutflownormalization.PeritsCFstatement,Rmb47.3bnofYoYincreasein1H26was attributablefroma swing in its placements withthecentral bankand otherbanksandRmb9.9bnfromYoYhigherincomingdeposits. Contract liabilities(i.e.,prepaymentfromdistributors)amountedtoRmb3.2bnatend-1H26(vsRmb3.0bnatend-1Q26,Rmb8.0bnatend-2025andRmb5.5bnatend-1H25),reflectingitsbizmodeltransition fromtraditional wholesaletowardsDTCand consignment/concessionaire salesundernewwholesalemodel (seedetailsin later Section“Moutai'smarket-oriented transformation plan") ItsB/Sremainedstrong,with~Rmb200bnofnetcashatend-1H26 ExitofHuijin&CSFfromTop1Oshareholders Perits1Hresults,Central HuijinAssetManagementandChinaSecuritiesFinance(CSF),bothofwhicharehigh-profile investmentarms oftheCentral Government,dropped out of Moutai'stopten shareholders byend-2Q26 Thetwo institutionsheld0.83%and0.32%of Moutai'sstakes at end-1Q26andneitherappears intheend-2Q26top10shareholderlist. TworoundsofASPhikesin2026 OnMar31,2026,Moutai liftedtheex-factorywholesaleASPofFeitian(53%vol,aboutRmb6o/bottleofpr