Kweichow Moutai: Wholesale Price Drop Sparks Market Concerns, but Profit Outlook Is Intact

The recent fall of the flagship 53-degree Feitian Moutai wholesale price to about CNY 2,100 per 500ml bottle, from CNY 2,630 as of end-March 2024, has raised market concerns over premium baijiu’s demand and profit outlook. While we expect China’s baijiu sales as a whole to remain sluggish in 2024, we continue to believe premium baijiu’s demand is resilient. We expect Moutai, and other premium baijiu’s profit outlooks to remain steady. Hence, we maintain both our earnings forecasts and fair value estimate of CNY 1,780 per share for Moutai. We continue to believe Moutai’s unique cultural status, unmatched brand image, and outstanding product quality, make it best positioned to benefit from China’s baijiu premiumization trend over the long term. Following the recent share price weakness, we think the shares are currently undervalued.