(Yicai Global) July 28 -- Diageo-controlled Chinese distiller Swellfun's dismal profit drop in the first half of the year has raised some concerns over whether the recent stock price rally of the mainland's liquor sector has legs. The world's most valuable distiller Kweichow Moutai's earnings to be released tonight should offer some guidance.

Swellfun's net profit fell 79 percent to CNY103 million (USD14.7 million) from a year ago as people gathered over drinks less frequently during the Covid-19 pandemic, the Sichuan province-based firm said in a statement yesterday. Its revenue slid by 52 percent to CNY804 million. Both of the declines had widened from the first quarter.

The firm's stock price [SHA: 600779] dropped 3.9 percent to CNY64.40 (USD9.20) this afternoon. Since the low point of late March, the shares had more than doubled in price earlier this month.

Other Chinese liquor companies told Yicai Global that the second quarter was worse than the first one as they could still sell products before the most trying times of the pandemic but after March, the whole second quarter was overshadowed by the epidemic.

Tonight will show whether Kweichow Moutai is in the same boat with its peers, based on its second-quarter earnings. The Zunyi-based baijiu maker seemed to be unaffected by the epidemic in the first quarter as it had boosted its net profit by 17 percent from a year ago with a 13 percent increase in revenue. After that, its stock price had risen by half during the second quarter and was about 3 percent up even today.

As the epidemic situation started easing in China, the demand began showing signs of recovery and Swellfun focused on reducing its inventory in the second quarter, said the firm that is controlled by London-based beverage giant Diageo.

Editor: Tang Shihua, Emmi Laine