China Liquor Giant Moutai Defies Market Slump as Defensive Play

  • In Business
  • 2022-04-25 01:23:33Z
  • By Bloomberg

(Bloomberg) -- Chinese liquor giant Kweichow Moutai Co. is back in favor in the stock market after a sluggish 2021 as investors bet on its strong pricing power and earnings resilience from Covid-19 headwinds.

Most Read from Bloomberg

  • Ukraine Latest: Zelenskiy Says Top U.S. Officials to Visit Kyiv

  • Ukraine Latest: Blinken and Austin Meet Zelenskiy in Kyiv

  • Macron Beats Le Pen to Win Second Term as French President

  • New Texts Shed Light on Elon Musk's 2018 Spat With Saudi Fund

  • Disney's $578 Million Tax Break Left Untouched in DeSantis Feud

The company's shares have at one point added $33 billion in market value since their recent low on March 15. Their advance of 11% beats market benchmark CSI 300 Index's 0.7% rise. The stock ended last year down by a fifth from an all-time high in February after authorities warned about excessive rises in asset prices.

Moutai, the maker of potent baijiu liquor that's a staple in Chinese banquets, is considered a defensive stock at a time when Covid lockdowns cloud the growth outlook of many domestic firms. The distiller, which is slated to announce first-quarter results on April 26, has the fourth-highest gross margin among CSI 300 Index companies.

"At this time, few A-shares companies other than Covid vaccine makers and testing providers have more guaranteed growth and higher margins than Moutai," said Shen Meng, director of Beijing-based boutique investment bank Chanson & Co.

Moutai is among the top performers in the CSI 300 consumer staples index for the past month.

Seasonal Sales

March and April have historically been a low season for its sales, which peak in holiday periods such as Lunar New Year and Mid-Autumn Festival, according to Euan McLeish, analyst at Sanford C Bernstein. And there's a significant gap between the factory and retail prices of Moutai's products, meaning that if consumer demand is weak, it will mostly be distributors rather than the company that will lose out, he said.

McLeish sees "positive signals" in Moutai's guidance last month of 15% growth in revenue in 2022, an increase from 10.5% rise forecast last year, as well as the company's move to boost its direct-channel sales.

The broker maintains an outperform rating with a target of 2,400 yuan, 35% higher than Friday's closing price. If the shares rebound further, the liquor maker that bruised many high-profile funds last year may give investors reason to cheer.

Most Read from Bloomberg Businessweek

  • Everything You Need to Know About Netflix's Big Miss

  • How WALL-E Predicted the Future

  • Alzheimer's Trials Exclude Black Patients at 'Astonishing' Rate

  • Beijing Crackdown Derails Alibaba's Bid for Amazon-Size Profit

  • Elon Musk Says He Has a Plan B for Twitter. Does He Have a Plan A?

©2022 Bloomberg L.P.


More Related News

Russia Default Risk Surges as US Set to End Key Bond Waiver
Russia Default Risk Surges as US Set to End Key Bond Waiver

(Bloomberg) -- Russian default risk surged as investors reacted to the possibility that the Biden administration will fully block bond payments from the...

US Set to Block Russian Debt Payments, Raising Default Odds
US Set to Block Russian Debt Payments, Raising Default Odds

(Bloomberg) -- The Biden administration is poised to fully block Russian bond payments to US investors after a deadline expires next week, a move that could ...

Walmart-Backed PhonePe Buys Indian Wealth Management Firms
Walmart-Backed PhonePe Buys Indian Wealth Management Firms

(Bloomberg) -- PhonePe, an Indian payments company backed by Walmart Inc., will acquire two wealth management firms for a total enterprise value of $75...

Baidu's Chip Affiliate Eyes Fundraise at $2.5 Billion Valuation

(Bloomberg) -- Baidu Inc.'s chip affiliate is looking to raise 2 billion yuan ($317 million) in a new funding round, people familiar with the matter said, as...

Goldman Sachs Cuts China
Goldman Sachs Cuts China's Growth Forecast to 4% on Covid Policy

(Bloomberg) -- Goldman Sachs Group Inc. cut its forecast for China's gross domestic product growth this year to 4% from 4.5%, citing worse-than-expected...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business