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Kweichow Moutai forecast raised to CNY 75 billion

Despite fears that China is being hit by a trade slowdown which will impact consumer demand, the country’s premier baijiu maker is booming.

Kweichow Moutai posted a 21% year-on-year rise in net profit for the first half of the year, driven by strong revenue growth.

Net profit increased to CNY35.98 billion (US$5.0 billion) in the first six months, compared with CNY29.80 billion in the same period in 2022, when Covid restrictions were in full force.

Revenue climbed 19% to CNY90.99 billion, which lifted operating profit to CNY49.89 billion, up from CNY41.63 billion a year earlier.

Core brand sales increased 19% year-over-year, reaching CNY59.28 billion.

The company’s success plays out against a stark backdrop for the Chinese economy with exports falling rapidly.

Last month, China’s exports were down by 14.5%, and imports slowed by 12.5%, figures far bleaker than economists had predicted.

But despite those gloomy numbers, observers expect a slowdown to have no effect on Kweichow Moutai and analysts believe the baijiu giant will power further ahead in the rest of this year.

They base that prediction on Moutai’s unshakeable position in China’s drinking culture and the fact that it has been able to push through higher consumer prices even during the pandemic.

Moutai is the biggest consumer product share quoted on China’s markets, (valued at about US$330 billion), and the Morningstar investment house calculates that the drinks company’s shares will continue to advance following its second-quarter results, which revealed robust demand for Moutai and premium baijiu, despite the sluggish economy.

Moutai is continuing to introduce premium products and is driving aggressively into direct sales to consumers (DTC) which generates higher margins.

Morningstar has therefore raised its 2023 net profits forecast for Kweichow Moutai by 3% to CNY 75 billion.

It also predicts that net profit will grow at a compound annual growth rate of 14.8% in the five years to the end of 2027, up from 13.7% in its previous forecast.


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