20230206-招银国际-贵州茅台-600519.SH-Proxy_of_China_s_consumption-led_recovery__buying_into_any_weakness_for_the_next_recovery_wave_4页_894kb

Kweichow Moutai (600519 CH) Company Update Summary

Core Content

Kweichow Moutai is positioned as a proxy for China's consumption-led recovery, with the potential to benefit from the reopening of restaurants and social events. The company is also leveraging its platform extension through the i-Moutai app, which launched the 100ml "Flying Fairy" SKU and generated RMB15bn in 2022 revenue (~16% of total) with 30mn active users. Additionally, Moutai is diversifying its sales mix with products such as Moutai 1935, Moutai Prince Classics, and Moutai Prince Gold.

Main Points

• Recovery Opportunity: Moutai is well-positioned to benefit from the ongoing consumption recovery in China.
• Catalysts: The i-Moutai platform and the expansion of its Series baijiu product line are key growth drivers.
• Capacity Constraints: There is a known capacity bottleneck for Moutai and Series baijiu, which may limit growth until the announced capacity expansion (Moutai/ Series baijiu to 71k/ 56k ton) is completed.
• Price Hikes: Without a legitimate substitute, Moutai can gradually increase prices to monetize excess demand.
• Earnings Outlook: The company is projected to have a 3-year revenue CAGR of 16% and net profit CAGR of 17% from 2022 to 2025E.
• Gross Margin: Gross margin is expected to steadily improve, reflecting better cost control and pricing power.

Key Information

• Current Price: RMB1,818
• Target Price (TP): RMB2,440 (Up/Downside +34.2%)
• Earnings Assumptions:
  • 4Q22 revenue: RMB37bn, net profit: RMB18bn
  • 2022E total revenue: RMB127.2bn, net profit: RMB62.6bn
  • 2023E revenue growth: 17.7%, driven by 16.6% growth in Moutai baijiu and 27.7% in Series baijiu
  • 2023E volume growth: 8% for Moutai baijiu, 14% for Series baijiu
• Valuation: Target price is based on a 41.0x end-23E P/E, lower than the mid-22 P/E of 53.7x, reflecting a long-term average since 2019.
• Share Performance:
  • 1-mth: +4.9%
  • 3-mth: +23.4%
  • 6-mth: -3.8%
• Shareholding Structure:
  • Kweichow Moutai Winery: 54.0%
  • HK Securities Clearing: 7.3%
  • Guizhou State Own Capital: 4.5%
• Market Cap: RMB2,318.9bn
• Dividend Yield: 2.7% in 2022E, 1.6% in 2023E, and 1.9% in 2024E
• ROE: 29.1% in FY20A, 27.7% in FY21A, 27.9% in FY22E, 31.9% in FY23E, and 30.7% in FY24E
• Earnings Summary:
  • Revenue: RMB97,993mn (FY20A), RMB109,464mn (FY21A), RMB127,215mn (FY22E), RMB149,786mn (FY23E), RMB172,710mn (FY24E)
  • Net Profit: RMB46,697mn (FY20A), RMB52,460mn (FY21A), RMB62,593mn (FY22E), RMB74,579mn (FY23E), RMB86,626mn (FY24E)
• Financial Highlights:
  • EBIT: RMB66,387mn (FY20A), RMB73,738mn (FY21A), RMB87,989mn (FY22E), RMB104,098mn (FY23E), RMB120,466mn (FY24E)
  • EBITDA: RMB67,704mn (FY20A), RMB75,217mn (FY21A), RMB89,469mn (FY22E), RMB105,757mn (FY23E), RMB122,340mn (FY24E)
  • Net cash from operating activities: RMB51,669mn (FY20A), RMB64,029mn (FY21A), RMB69,715mn (FY22E), RMB82,539mn (FY23E), RMB95,555mn (FY24E)
• Balance Sheet:
  • Total net assets: RMB167,721mn (FY20A), RMB196,958mn (FY21A), RMB236,212mn (FY22E), RMB249,818mn (FY23E), RMB302,035mn (FY24E)
  • Shareholders’ equity: RMB161,323mn (FY20A), RMB189,539mn (FY21A), RMB224,904mn (FY22E), RMB234,386mn (FY23E), RMB282,232mn (FY24E)
• Key Ratios:
  • Gross margin: 91.6% (FY20A), 91.6% (FY21A), 92.5% (FY22E), 93.0% (FY23E), 93.2% (FY24E)
  • Operating margin: 67.7% (FY20A), 67.4% (FY21A), 69.2% (FY22E), 69.5% (FY23E), 69.8% (FY24E)
  • Net margin: 47.7% (FY20A), 47.9% (FY21A), 49.2% (FY22E), 49.8% (FY23E), 50.2% (FY24E)
  • ROE: 29.1% (FY20A), 27.7% (FY21A), 27.9% (FY22E), 31.9% (FY23E), 30.7% (FY24E)
  • Current ratio: 0.8 (FY20A), 0.8 (FY21A), 0.9 (FY22E), 0.9 (FY23E), 0.9 (FY24E)
  • Inventory turnover days: 1,274 (FY20A), 1,331 (FY21A), 1,331 (FY22E), 1,331 (FY23E), 1,331 (FY24E)
  • Net payable days: 1,317 (FY20A), 1,375 (FY21A), 1,375 (FY22E), 1,375 (FY23E), 1,375 (FY24E)

Recommendations

• Rating: BUY (Maintain)
• Rationale: Moutai is expected to benefit from the ongoing recovery in China's consumption sector, supported by its strong brand and platform extension. The company is projected to have a multi-year growth story with improved revenue and net profit growth, along with a steadily rising gross margin.
• Investor Note: The analyst recommends buying into any weakness for the next recovery wave, which is expected to re-accelerate from 2Q onwards.

Additional Information

• Related Reports:

  1. China Consumer - Positive takeaway from F&B distributors; but sector's bull-run could take a breather from here - 31 Jan 2023
  2. CR Beer (291 HK) – Another positive year for 2023; our preferred pick for China's reopening – 22 Jan 2023
  3. China Feihe (6186 HK) - Looks to be a beta play within 1H23, when birth rate likely starts inflecting post 3Q - 3 Jan 2023

• Disclosures & Disclaimers: The report is not tailored for individual investors and is subject to change. There may be conflicts of interest due to CMBIGM's market-making activities. Investors should consult with a professional financial advisor before making any investment decisions.