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Kweichow Moutai up 13% but investor confidence low
The world’s biggest alcohol company, baijiu producer Kweichow Moutai, achieved solid sales and profits in the third quarter of this year despite sluggish demand in its China home market.
Kweichow Moutai’s net profit in Q3 rose 13% from a year earlier to 19.13 billion yuan (US$2.69 billion).
Sales rose by 15% to 38.845 billion yuan, taking turnover so far in 2024 to 120.78 billion yuan, up 17% from the equivalent period in 2023
Last month the company announced its first-ever share repurchase plan, offering to buy back between 3 billion and 6 billion yuan worth of shares over the next 12 months.
Together with the move to lift its regular dividend ratio to 75% from 52%, “the company has increasingly demonstrated its willingness to return more cash to shareholders,” Citi Group analysts said.
Not all is set fair for the company, however.
Falling share price
Moutai’s share price has fallen this year by roughly 10% this year as wholesale prices slid in the face of lukewarm consumer sentiment.
By comparison the Shanghai market has put on more than 10%.
Moutai has been subject to the same consumer price resistance that the major global drinks groups have encountered this year in China.
Average sale prices at prime wholesalers fell roughly 5% to about 2,250 yuan a bottle in September despite it being a prime festive season for family celebrations and gifting.
Analysts predict Moutai will bring in plans to stabilise wholesale average selling prices over the next six months to restore investor confidence in the long-term outlook.
In January 2024, the drinks business revealed that Kweichow Moutai had lost its top spot as China’s most valuable company. Mobile comms firm Tencent snatched the crown while Alibaba fell into the second slot, with Kweichow sliding to third place.
The plight of the global drinks firm is not helped by counterfeiters in China who have adopted a technique of drilling holes in bottles of Moutai to replace the liquid with knock-off liquor. Holes hidden behind the back labels of 30 bottles were discovered by authorities in Hangzhou, the capital of Zhejiang province, when they inspected five cases of the baijiu. After removing the labels, the counterfeiters used professional equipment to drill 0.2mm holes in the moutai bottles after removing the labels, the appraisers from the distillery told China Consumer News. The holes were then plugged with porcelain powder and the labels replaced.
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