Incident: According to the Shanghai Securities News, on July 1, Wang Li, deputy secretary of the Kweichow Moutai Party Committee and acting general manager, hosted an investor exchange meeting in Beijing to listen to investors' opinions and suggestions on Maotai's market value management work, answer investors' concerns, and discuss new paths for Maotai's future development.
Respond to market concerns and reflect leading responsibility. Since May, the price of Flying Moutai liquor has continued to fall rapidly, causing focused attention and great concern. The market lacks confidence in whether the company can take effective price stabilization measures, and there is insufficient confidence in the stability of medium- to long-term demand. Recently, on the one hand, the company's management strengthened market research and communication and guidance with dealers, and prices rebounded steadily in response (the current batch price rebounded about 250 yuan from June's low price), and on the other hand, intensified interaction with investors, listened to investors' voices and suggestions, and responded positively to market concerns, demonstrating leading responsibility.
Falling prices during the adjustment period unleashed risks, and the channel layout was improved and more resilient. The company believes that Maotai liquor is in a period of adjustment, and is in the midst of a “three-phase superposition” — the macroeconomic cycle of the transformation of old and new kinetic energy, the liquor industry cycle, and Maotai's own cycle. We believe that under the premise of the industry's perception of the adjustment period, a moderate correction in Maotai liquor prices can release price and operating risks. The company will respond to the domestic macroeconomic cycle with measures such as expanding demand from emerging industries, enhancing supply and demand adaptation and increasing internationalization to strengthen channel control and precise marketing to balance prices, and dilute the weakening “investment demand” and the intensification of fluctuations caused by random scalper prices. Compared with the previous adjustment period, Maotai's core competitiveness has been strengthened, the product matrix is more complete, the channels are more diverse, the moat for consumer value and channel profit is thicker and wider, and it is more resilient to withstand the cycle.
Multiple measures have helped prices rebound strongly, interests are consistent, and the company has spare time in market value management. As Maotai liquor prices recovered, the company played a combo punch. On June 23, the Famous Liquor Research Institute reported “the company cancelled the unpacking policy, cancelled the launch of large boxes, and stopped selling premium Maotai for 15 years”; following the Guangdong research discussion with Chairman Zhang Deqin, on June 25-30, Wang Li, the general manager of the group led a team to conduct market research in Shanghai, Zhejiang, Jiangsu, Beijing and other places, and organized market work meetings in the three provinces and regions of northern Jiangsu, Shanghai, and the seven northern provinces and regions; in addition, they also discussed and guided some markets. Channel shutdowns and rectification have all boosted market confidence, in part The supply of bulk goods was reduced, which led to a rebound in bulk prices. From 2 consecutive years of special dividends to more active investor interaction, it has demonstrated the consistency of interests. Whether in the short to medium to long term, the company's market value management toolbox is still quite full, balances volume and price, maintains a reasonable level of growth, and high dividends, which are easy to win the approval of investors.
More can be expected from internationalization. Maotai liquor accounts for less than 3% of the international market revenue in 2023, but the absolute value of 4.35 billion yuan is still number one in the industry, and the leading Chinese liquor company must also be a pioneer in the internationalization of Chinese liquor. At the 2023 shareholders' meeting, company leaders also accurately graded questions from investors and expressed their intention to speed up the layout. Internationalization will become one of the company's most important strategies. Starting from Chinese overseas enterprises, more systematic and targeted operations will bring better results.
Profit forecast and investment rating: Taking into account the external economic environment, the company's operating pace and long-term development plan, we slightly adjusted the 2024-2026 net profit to be 868, 959, and 106 billion yuan (previous values were 872, 1004, 115.5 billion yuan, respectively), and +16%, 10% (previous values were 17%, 15%, and 15%, respectively). The current market value corresponding to PE is 22, 20, and 18 times, respectively. The valuation is at a low level in the company's history, maintaining a “buy” rating.
Risk warning: Continued macroeconomic downturn has led to a weakening of demand that greatly exceeds expectations; a sharp drop in prices has caused panic; the market is overreacting to a reasonable future deceleration, etc.