Kweichow Moutai’s stock price upgrade could propel the valuation of China’s top liquor distiller to US$507 billion

Name: Baijiu, China's national spirit, seeking markets abroad where taste still fails to intoxicate
Uploaded: 2021-01-05T08:01:35.000Z
Duration: 1 min 56 s
Description: Baijiu, China's national spirit, seeking markets abroad where taste still fails to intoxicate

Kweichow Moutai and Wuliangye Yibin rose to records for two straight days, leading the broader market gains since the start of the new year

CICC’s price target implies a further 30 per cent gain for Kweichow Moutai’s shares

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Kweichow Moutai said that it profits probably rose by about 10 per cent last year. Photo: Simon Song

Zhang Shidongin Shanghai

Published: 4:01pm, 5 Jan 2021Updated: 10:44pm, 5 Jan 2021

Kweichow Moutai, the world’s 16th-most valuable company, may have another 30 per cent to go, which would bolster its market capitalisation to a staggering US$507 billion, if a forecast by China’s largest home-grown investment bank is to be believed.

With liquor distillers Kweichow Moutai and Wuliangye Yibin rising to record highs for two days in a row and leading the broader-market gains since the start of the new year, China International Capital Corp (CICC) has raised the share-price estimates for top tipple makers. Their strong momentum had lifted a gauge of consumer-staple stocks by 75 per cent last year, making them the best-performing sector.

Kweichow Moutai, which has topped Industrial and Commercial Bank of China as the most valuable stock on China’s onshore market, 3.1 per cent to 2,059.45 yuan on Tuesday, extending a 69 per cent gain over the past year. Main rivals Wuliangye jumped 7.4 per cent to 319.98 yuan and Luzhou Laojiao rallied 7.3 per cent to 258.30 yuan.

CICC set a share-price estimate of 2,739 yuan for Kweichow Moutai in a report issued this week, implying a 33 per cent gain from its current stock price. The price target translates to a multiple of 55 times earnings for the distiller, the investment bank said. Guotai Junan Securities predicts that the stock will rise to 2,317 yuan.

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Baijiu, China's national spirit, seeking markets abroad where taste still fails to intoxicate

“The market has underestimated Moutai’s growth potential and secured outlook,” CICC said in the report. “The company has very strong pricing power in the industry and will continue to share the expansion of China’s high-end consumption.”

Profits probably rose by about 10 per cent last year, Kweichow Moutai said in a statement this week. Growth may reach 20 per cent in 2021, according to the estimates of analysts polled by Bloomberg.