China’s Craving for Fiery Liquor Boosts Outlook for Moutai

(Bloomberg) -- Kweichow Moutai Co. raised its annual revenue forecast after the world’s most valuable distiller in January increased the price for its signature drink for the first time in five years.

Revenue will probably climb about 15 percent in 2018, up from a previous forecast made in December for growth of more than 10 percent, the Guizhou province-based distiller said in an exchange filing on Tuesday. Moutai raised the price of its core baijiu product, called Flying Fairy, by 18 percent from the start of this year.

The company’s fiery grain liquor, traditionally the toast of choice among the country’s leaders, has found widespread popularity among China’s middle class as they embrace a more affluent lifestyle. In addition to raising prices, the company, which last year overtook Diageo Plc as the world’s top distiller by market value, is looking to grow by expanding beyond its core liquor operations.

Moutai, which came under criticism in November for having a lofty market valuation, reported net income of 27.1 billion yuan for last year, beating the 25.8 billion-yuan average of 23 analysts estimates compiled by Bloomberg. The company proposed a cash dividend of about 11 yuan per share.

The company reported sales volume of 30,206 tons, up 32 percent from the year before. This implies that its supply volume is “more flexible than expectations, and the company is quite elastic in its ability to meet rising demand due to sufficient inventory,” said Goldman Sachs analysts Xufa Liao and Brian Dai in a note released on Wednesday.

Kweichow Moutai shares dropped as much as 3.3 percent in Wednesday morning trading in Shanghai. The stock has climbed 82 percent over the past 12 months.

©2018 Bloomberg L.P.