Date of Report
October 28, 2024
Broker Name
UOB Kay Hian Private Limited
Company Overview
Kweichow Moutai is a leading baijiu producer in China, known for its high-end brand “Feitian Moutai.” It stands as the largest market-cap company among the 18 listed A-share baijiu companies, focusing on producing one of the three most prestigious distilled liquors globally. Its market presence and growth signify its dominant position within the consumer staples sector.
Stock Data
- Bloomberg Ticker: 600519 CH
- Share Price: RMB 1,558.85
- Target Price: RMB 2,174.00, indicating a 39.5% upside
- Market Capitalization: RMB 1,958,223.9 million (approximately USD 274,973.5 million)
- 52-Week High/Low: RMB 1,910.00 / RMB 1,245.83
- Major Shareholders:
- Kweichow Moutai Group: 54.07%
- Guizhou Province State-owned Capital Operation Co., Ltd.: 4.54%
3Q24 Financial Performance
Revenue
Kweichow Moutai reported a 3Q24 total revenue of RMB 39,671 million, marking a 7.3% quarter-over-quarter (qoq) increase and a 15.6% year-over-year (yoy) rise. For the nine months ending September 2024 (9M24), revenue reached RMB 123,123 million, surpassing the annual revenue growth target of 15% with a 16.9% increase.
Profit Margins
- Operating Revenue: RMB 38,845 million (up 15.3% yoy)
- Gross Profit: RMB 35,368 million, with a gross profit margin of 91.0%
- EBIT: RMB 26,193 million, showing a 9.2% qoq and 14.7% yoy growth
- Core Net Profit: RMB 19,109 million, with a net profit margin of 48.2%
Key Financial Ratios (2024 Forecast)
- Price-to-Earnings (PE) Ratio: 22.5x for 2024, projected to decrease to 19.5x in 2025
- Dividend Yield: 3.3% (2024 forecast), with a rise to 3.8% in 2025
- Net Margin: 50.3% for 2024, slightly decreasing to 50.1% by 2026
- Return on Equity (ROE): Expected to be 36.3% in 2024
Revenue Breakdown
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By Product:
- Revenue from Moutai brand increased 16% yoy, making up 84% of baijiu revenue in 3Q24.
- Non-Moutai series grew by 13% yoy.
-
By Sales Channel:
- Direct Sales: Represented 47% of baijiu revenue, up 23% yoy, totaling RMB 18,261 million.
- Dealers Channel: Accounted for 53%, experiencing a 10% yoy growth with revenue at RMB 20,543 million.
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By Region:
- Domestic: RMB 37,526 million, increasing by 15.2% yoy.
- Overseas: RMB 1,279 million, up 35.7% yoy, though qoq figures show a decline of 8%.
Operational Highlights
- Contract Liabilities: Decreased by 13% yoy to RMB 9,931 million by the end of 3Q24.
- i-Moutai App Revenue: RMB 4,516 million in 3Q24, contributing 25% to direct sales. However, this represents an 18% decline yoy.
- Wholesalers Network: The company added 25 domestic wholesalers in 3Q24, bringing the total to 2,122.
Stock Impact and Market Outlook
The report expects Feitian Moutai’s wholesale prices to face short-term pressure due to significant e-commerce promotions during the upcoming 11.11 shopping festival. Retail prices for unpacked Feitian Moutai have been observed dropping below RMB 2,100 per bottle on some platforms, contrasting with the latest wholesale prices of RMB 2,230 per bottle as of October 27, 2024.
Risks
Potential risks identified include:
- A slower-than-expected economic recovery.
- Heavy promotional activity on online platforms, which could impact wholesale prices.
- Volatility in Feitian Moutai’s wholesale prices, influenced by market demand and e-commerce trends.
Recommendation and Valuation
UOB Kay Hian maintains a “BUY” recommendation for Kweichow Moutai with a DCF-based target price of RMB 2,174.00, representing 31.4x PE for 2024 and 27.2x PE for 2025. The stock’s current PE is 22.5x for 2024, indicating potential for significant appreciation in value based on its stable growth and market position.
