Kweichow Moutai shares rise after world’s most valuable distiller allays investor concerns, limits dealings with affiliates
- Company will cap such dealings to an amount equal to 5 per cent of its net asset value this year
- Stock jumps by as much as 6 per cent after Citic Securities raises share price estimate
Shares in Kweichow Moutai, the world’s most valuable liquor distiller, rose by as much as 6 per cent to 1,020.10 yuan (US$144.4) on Monday, following an announcement that it would cap the amount of the fiery liquor it sells to affiliates this year.
The company said it would limit sales to parent China Kweichow Moutai Winery Group to 5.6 billion yuan, equal to 5 per cent of the listed company’s book value, according to a filing with the Shanghai Stock Exchange on Monday.
“The controlling shareholder will keep the promise made when the company went public,” Kweichow Moutai said in a reply to an inquiry letter by the Shanghai exchange. “The affiliated dealings will not constitute direct or indirect competition against the company, and nor will it hurt the interest of the company and small shareholders.”
Shares of the Guizhou province-based distiller gained 5.9 per cent to 1,018.63 yuan at the close on Monday in Shanghai, extending this year’s gains to 73 per cent against a 13 per cent advance on the benchmark Shanghai Composite Index.
While investors cheered the announcement, Citic Securities, China’s biggest publicly traded brokerage, set a share price estimate of 1,200 yuan and raised its 2019 projection for Kweichow Moutai’s earnings per share by 4.2 per cent to 35.10 yuan, and for 2020 by 1.7 per cent to 41 yuan.
Earnings at the company will probably increase by about a quarter this year, and there is a high chance it will raise product prices in the next one or two years, Xue Yuan, analyst at the brokerage, said in a report on Monday.