Kweichow Moutai released its 23rd annual report. In 2023, we achieved revenue of 147.69 billion yuan, a year-on-year increase of 19.0%, net profit to mother of 74.73 billion yuan, an increase of 19.2% year-on-year, and earnings of 59.49 yuan/share. In 2023, the company plans to distribute cash of RMB 308.76 (tax included) for 10 shares. 4Q23 revenue and net profit to mother were 44.43 billion yuan and 21.86 billion yuan respectively. Revenue increased 20.3% year-on-year, and net profit to mother increased 19.3%. Revenue for 2023 was higher than previously forecast and higher than last year's target plan, maintaining a “buy” rating.
Key points to support ratings
In 2023, the volume and price of Maotai liquor rose sharply, with sales growth of more than 10%. Maotai's 1935 sales led to a sharp increase of 29.4% in the revenue of the series. (1) Maotai Liquor's revenue for 23 years was 126.59 billion yuan, an increase of 17.4% over the previous year.
Maotai sold 42,000 tons, up 11.1% year on year. The consumption scenario resumed. The average price of one batch was 2,740 yuan in '23, which was basically the same as the previous year, boosting the cost performance ratio of products, and terminal demand maintained a strong sales trend.
The tonnage price was 3.06 million yuan/ton, an increase of 5.7% over the previous year. We judge that this was mainly due to the increase in the share of direct sales channels. In addition, it also had a certain impact on the beginning of the price increase of Maotai liquor with the company in November '23. In the fourth quarter, Maotai's revenue increased by 17.6%. On November 1, the factory price of Pumao increased by about 20%, and the wholesale price of Pumao rebounded slightly after mid-December. Therefore, we determine that in the fourth quarter, the company may have actively adjusted its business pace to control Pumao's delivery volume and maintain price stability. (2) Series wine revenue was 20.63 billion yuan, up 29.4% year on year, sales volume was 310,000 tons, up 2.9% year on year, and the tonnage price was 662,000 yuan/ton, up 25.7% year on year, of which 4Q23 revenue increased 48.2% year on year. The main contribution to the revenue of the wine series came from an increase in tonnage prices and a slight increase in sales volume. Maotai 1935 led to the optimization of the overall product structure of the series wine series. According to the annual report, Maotai 1935 has become a major single product with revenue of 10 billion yuan. Maotai Prince Liquor has exceeded 4 billion yuan for single products, and Han Sauce, Guizhou Daqu, and Lai Mao have each exceeded 1 billion yuan.
The i-Maotai platform led to a rapid increase in the share of direct sales channels in 2023. (1) In 2023, the company's direct channel revenue was 67.23 billion yuan, up 36.2% year on year, accounting for 45.7% of revenue, up 5.8 pcts from 2022. iMaotai's digital marketing platform contributed greatly to direct sales revenue. According to the company's annual report, i Maotai achieved revenue of 22.37 billion yuan in 2023, an increase of 88.3% over the previous year. According to the Maotai Group's 2024 work conference, the iMaotai platform had more than 53 million registered users and more than 4.8 million daily active users. Other online platforms had revenue of $1.83 billion in 2023. Since the proportion of direct sales channels has reached a high level, direct operating revenue increased 20.2% year on year in the 4th quarter of '23, slower than 44.9% in 1-3Q23, indicating that i-Maotai's driving effect on sales has weakened. (2) In 2023, the company's traditional channel revenue was 79.99 billion yuan, an increase of 7.5% over the previous year.
In 2023, the number of domestic dealers decreased by 5, increased by 1 to 2080, and the number of foreign dealers increased by 1 to 106. It is expected that the share of traditional channels will continue to decline in the future.
The team is enterprising, there is plenty of leftover food, and the certainty of performance growth in the next two years is high. (1) The company's executive team is forging ahead, continues to develop new products and channels, and has achieved outstanding results in several areas such as brand rejuvenation, digitalization, and internationalization. (2) In the past two years, the company increased the proportion of direct sales channels and released more non-standard products, Maotai 1935, to help the report performance continue to grow. We believe that the November 23 price increase in Pumao will ensure the smooth achievement of the 2024 performance targets, and that the company can sort out non-standard and 1935 channels and price systems to promote the long-term healthy development of these products. (3) At this stage, the company's channel system is healthy, the inventory level is reasonable, and the profit of the Pumao channel is high, which can support the safety cushion of performance. The certainty of growth over the next two years is good. We expect revenue to maintain a growth rate of 15% or more.
valuations
In 2023, the company plans to increase its total revenue by about 15% year on year. Taking into account product price increases and terminal demand, the company is expected to exceed the annual plan. The 2024-2026 EPS is expected to be 69.37, 80.30, and 91.02 yuan/share, respectively, up 16.6%, 15.8%, and 13.4% year-on-year respectively, corresponding to the price-earnings ratios of 24.7X, 21.4X, and 18.8X respectively, maintaining the “buy” rating.
The main risks faced by ratings
Channel inventory exceeded expectations. The economic recovery fell short of expectations.