Kweichow Moutai announced the 2024 production and operation situation. In 2024, the company expects to achieve total operating income of 173.8 billion yuan, +15.44% year-on-year, and net profit attributable to shareholders of the parent company of 85.7 billion yuan, or +14.67% year-on-year. 2024 came to a successful conclusion, and the company concentrated on transformation and development in 2025. As a leader in liquor, the company has strong business resilience, the ability to go through cycles, and maintain a buying rating.

Key points supporting the rating

In 2024, the company successfully completed the goals set at the beginning of the year and ended successfully. (1) In 2024, the company expects to achieve total revenue of 173.8 billion yuan, an increase of 15.4% over the previous year, and a net profit of 85.7 billion yuan to mother, an increase of 14.7% over the previous year. In November 2023, the company raised the factory price of Flying Moutai. The Pumao price increase ensured a steady increase in 2024 performance, and the company ended successfully in 2024. (2) 4Q24 expects to achieve total revenue of 50.68 billion yuan, a year-on-year increase of 12.0%, and net profit to mother of 24.87 billion yuan, an increase of 13.8% over the previous year. The profit growth rate in the fourth quarter was higher than the revenue growth rate, mainly related to changes in product structure.

The 4Q24 series decelerated significantly, and Maotai maintained double-digit growth. (1) In 2024, Maotai liquor is expected to achieve revenue of 145.8 billion yuan, an increase of 15.2% over the previous year, and the serial wine series will achieve revenue of 24.6 billion yuan, an increase of 19.2% over the previous year. Among them, the revenue growth rates of Maotai Liquor and Series Liquor were 13.6% and 3.4% respectively in the fourth quarter. Affected by the industry environment, the batch price of Flying Moutai fluctuated greatly during the year. Combined with Bairong wine prices, Tonghua Shun, and today's wine prices, the bulk price of 2H24 original box and Sanfei dropped by 270 yuan/bottle and 185 yuan/bottle respectively in the first half of the year. The lowest price of Sanfei fell below 2,200 yuan in the fourth quarter. In the 3rd quarter, in order to stabilize the price, the company adjusted the delivery structure, increasing the quota share of Maotai and boutique Maotai in the Year of the Dragon, reducing Pu Fei's quota share, and improving the Maotai wine product structure. We determined that in the fourth quarter, the company maintained the three-quarter shipping policy. (2) There was a marked decline in revenue growth in the fourth quarter. We judge that it is mainly related to 1935 completing tasks for the year ahead of schedule, compounding 2H24 Maotai 1935 with a large drop in batch prices, and the company actively controlled goods. The impact of the 4th quarter wine series on reporting was weakened. (3) In 2024, Maotai liquor production was 0.0563 million tons, down 1.6% year on year, series wine production was 0.0481 million tons, up 12.0% year on year, and the company's base wine production was stable.

Leaders actively seek change, respond to industry pressure by various means, and begin a new development cycle in 2025. Recently, the company held a dealer meeting to face the “adaptation of supply and demand” problems in the current market, adhere to the “three transformations” (customer base transformation, scenario transformation, service transformation), and balance channel relationships. Looking at specific measures, (1) In terms of products, the planned sales volume of Maotai in the domestic market in '25 will increase slightly compared to '24. Among them, sales volume of 53-degree, 500ml precious Maotai will decrease; the sales volume of 1000ml kilogram Maotai will increase moderately. Ensure stable pricing at Feitian by adjusting the product structure of Maotai Liquor. In terms of wine series, Maotai 1935, Maotai Prince Welcome, and Han Sauce Daequ created the “Three Ten Billion Division”. (2) In terms of channels, the company targets catering channels and international markets to increase the development of differentiated products to meet diversified needs. At the same time, adjust the product structure of specialty stores, supermarkets, and e-commerce contracts to increase the consumer reach rate. (3) In terms of market policy, in 2025, the company will increase market cost investment to enhance market development efforts and channel service capabilities. In the context of industry adjustments, the company actively seeks change, demonstrating the leading style.

valuations

The company formulated a “three-year dividend plan”. The 2024-2026 dividend ratio was not less than 75%, and cash dividends were implemented twice during the year. In mid-2024, cash dividends of 23.882 yuan (tax included) were distributed to all shareholders per share, totaling over 30 billion yuan. Recently, the company announced a repurchase plan. It plans to use its own capital of not less than 3 billion yuan (inclusive) and no more than 6 billion yuan to repurchase the company's shares. The repurchase will be used to cancel and reduce the company's registered capital. The above measures have boosted investor confidence, and the company's current valuation advantage is obvious. According to the company announcement and the current industry environment, we adjusted our previous profit forecast. We expect the company's EPS to be 68.23, 74.46, and 81.19 yuan/share for 24-26, respectively, +14.7%, +9.1%, and +9.0%, respectively. The corresponding PE is 21.1X, 19.3X, and 17.7X, respectively, maintaining the purchase rating.

The main risks faced by ratings

Channel inventory exceeded expectations. The risk of macroeconomic fluctuations. The price of Flying Sky continues to fall.