Date of Report

28 October 2024

Broker Name

UOB Kay Hian

Company Overview

Kweichow Moutai is a leading baijiu (Chinese liquor) company in China, renowned for its super-premium brand “Feitian Moutai.” It is one of the three most famous distilled liquor types globally and boasts the largest market capitalization among all 18 listed A-share baijiu companies.

Stock Data

• Share Price: Rmb1,558.85
• Target Price: Rmb2,174.00
• Upside: +39.5%
• Bloomberg Ticker: 600519 CH
• Shares Issued: 1,256.2 million
• Market Cap: Rmb1,958,223.9 million (US$274,973.5 million)
• 3-Month Average Daily Turnover: US$886.73 million
• 52-Week High/Low: Rmb1,910.00/Rmb1,245.83

Recent Performance

Revenue Growth

Kweichow Moutai’s 3Q24 revenue growth was in line with its annual target. The company reported a 9M24 revenue of Rmb123,123 million, reflecting a 17% year-over-year increase, exceeding the annual revenue growth target of 15%.

Profitability Metrics

• Gross Profit: Rmb110,548 million, up 17% year-on-year
• Gross Margin: 91.5%, slightly down from the previous year
• EBIT: Rmb82,876 million, rising 15% year-on-year
• Core Net Profit: Rmb60,779 million, growing 15% year-on-year

Market Dynamics

Price Pressures

The company expects that wholesale prices for Feitian Moutai will face pressure in the near term, particularly due to intense promotions on e-commerce platforms during events like the 11.11 shopping festival. Retail prices of unpacked Feitian Moutai in some stores have fallen to below Rmb2,100 per bottle.

Sales Strategy

Moutai has maintained its annual sales target, bolstered by positive prepayment progress from wholesalers. However, there is a concern regarding the volatility of Feitian Moutai’s wholesale prices influenced by market promotions.

Earnings Projections

No earnings revisions were made for the company, as the outlook remains stable. Key risks include a slower-than-expected economic recovery and promotional pressures that could impact pricing.

Financial Highlights

• Key Financials:
  • Net Turnover:
    • FY2023: Rmb150,560 million
    • FY2024 (Forecast): Rmb173,033 million
    • FY2025 (Forecast): Rmb199,056 million
  • EBITDA:
    • FY2023: Rmb103,377 million
    • FY2024 (Forecast): Rmb120,250 million
  • Net Profit:
    • FY2023: Rmb74,734 million
    • FY2024 (Forecast): Rmb86,987 million

Conclusion

Kweichow Moutai continues to exhibit strong revenue growth despite market pressures, maintaining its position as a leading player in the baijiu industry. The recommendation is to maintain a “BUY” rating with a target price of Rmb2,174.00, reflecting the company’s potential for continued growth in a competitive market.