Moutai Extends Its Winning Streak as Sales Top Forecast

(Bloomberg) -- Kweichow Moutai Co. topped its own revenue forecast for the first quarter as the maker of high-end baijiu liquor continued to dodge the slack in the Chinese economy that has cooled demand for other luxury goods.

• The fiery-liquor maker reported a 24 percent increase in revenue, to 21.6 billion yuan ($3.2 billion), beating the guidance it had given based on preliminary estimates earlier this month. Net income rose 32 percent to 11.2 billion yuan, according to a company statement Wednesday that came after market hours.
• The earnings report prompted Merrill Lynch to raise its price and profit targets for the company.

Key Insights

• Moutai’s result is an encouraging sign that the company can achieve double-digit growth that’s forecast for this year. The company is the world’s most profitable distiller, with gross margins of around 90 percent for the past decade.
• The stock has been a darling with investors as revenue continues to grow despite a weak Chinese economy. While Moutai continually beats analysts’ expectations, at least one has questioned the company’s growth prospects, saying Moutai’s shipment growth may slow in the second quarter.
• The Guizhou-based distiller’s liquor remains in high demand as it is coveted by China’s burgeoning middle class. The baijiu maker is looking to boost annual production capacity to 56,000 tons by year-end.

Market Performance

• Moutai shares fell as much as 1.9 percent to 951.22 yuan in early Shanghai trading Thursday. Moutai’s shares rallied 64 percent this year through Wednesday, outstripping the 34 percent rise in the Shanghai Shenzhen CSI 300 Index.
• The stock has gained over 15,000 percent since its 2001 debut in Shanghai and is close to becoming China’s first 1,000-yuan stock.

Get More

• READ: Top China Investor Only Has Eyes for One Mainland Stock
• NOTE: Moutai Shares Climb After Strong First-Quarter Outlook

To contact the reporter on this story: Daniela Wei in Hong Kong at jwei74@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Bhuma Shrivastava, Jeff Sutherland

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