The Ministry of Industry and Information Technology reported that the industry’s profits also decreased 4.6% year-on-year to 53.6 billion yuan during the four-month period.

The coronavirus lockdown impacted production, domestic sales and exports, contributing to significant declines for the industry.

Chinese firms produced 604 million litres of spirits in April. That is down by 2.44% year-on-year. However, it follows a recent trend that has seen the government and brand owners close production facilities that were catering to the very low end of the baiju market.

Chinese breweries increased their output by 7.46% to 3.1 billion litres in April, while winemaking output grew by almost a quarter to reach 33 million litres.

Baiju giant Kweichow Moutai has bucked the trend, as its share price has increased by more than 42% since mid-March. The industry bellwether is now trading at its widest ever margin above the consensus price target of analysts tracked by Bloomberg.

“The company’s current valuation has fully priced in the positive mix effect of the channel reform, increasing direct-to-customer sales mix,” said Allen Cheng, an analyst at Morningstar in Singapore. “The market is also pricing in a sharp rebound, which we think may not happen due to impending economic slowdown, which would result in downside risk.”

JP Morgan analyst Kevin Yin added: “If Moutai proves it is able to redefine a clean and healthy distribution relationship and eventually take back the enormous chunk of profits from distributors, we believe it would effectively translate into stronger earnings growth and trigger a valuation multiple re-rating.

“Moutai’s superior profitability, fundamental stability, and prospect of direct sales warrant a valuation premium.”