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Kweichow Moutai
BusinessMarkets

China’s market-beating liquor stocks fancied by money managers keep others wary of valuation, investing blunders

  • Kweichow Moutai and Wuliangye Yibin are among the most-researched and preferred stocks, more valuable than the next five biggest European peers combined
  • Their fiery rallies are keeping money managers in jubilant mood, others wary of potential sell-off as valuation soars

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Kweichow Moutai brand of liquor on display at a store in Shanghai, China. The baijiu distiller and its rival Wuliangye Yibin are among the top five most researched and preferred stocks by analysts and investors in mainland China. Photo: Handout
Zhang Shidong
The market-beating performance of China’s biggest liquor distillers are keeping money managers in a celebratory mood. Others who have enjoyed the bull run over the past two years are preparing to greet the new one with a dose of caution.
Kweichow Moutai, whose drink attained legendary status with Mao Zedong’s seal of approval, has appreciated 51.6 per cent in Shanghai this year while its Shenzhen-listed rival Wuliangye Yibin jumped 101 per cent. In 2019, they advanced by 100 per cent and 161 per cent respectively, while their global peers underperformed.

The dizzying run has boosted their joint capitalisation to 3.3 trillion yuan (US$503.7 billion), or 1.5 times their next four biggest overseas rivals — Anheuser-Busch InBev, Diageo, Pernod Ricard and Constellation Brands — combined. Kweichow Moutai trades at about 48 times this year’s earnings, a level not seen since 2008. Its consumer-staple peers within the CSI 300 Index members are priced at 31 times, or 50 per cent higher than their 10-year average, according to Bloomberg data.

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“Industry sentiment will remain rosy for at least another year, with earnings growth being certain and on good track,” said An Yaze, an analyst at CSC Financial in Beijing. “The trend will not be altered so that consumption upgrades will benefit the leading players.”

Shares of Kweichow Moutai, the world’s most valuable distiller, rose 2.5 per cent to 1,793.11 yuan in Shanghai on Friday, just shy of the record 1,801.98 set on September 1. Wuliangye added 2.1 per cent to 267.19 yuan in Shenzhen, close to an all-time high of 273 yuan on November 16.

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