Amidst apprehensions of a trade deceleration impacting consumer demand in China, the nation’s premier baijiu producer is defying the odds with remarkable growth.
Kweichow Moutai, a prominent player in the baijiu industry, has reported a striking 21% year-on-year surge in net profit for the first half of this year, propelled by robust revenue expansion.
The net profit for the initial six months soared to CNY35.98 billion (equivalent to US$5.0 billion), a substantial increase from CNY29.80 billion recorded during the same period in 2022, when the full force of Covid restrictions was in effect.
The impressive revenue growth of 19%, amounting to CNY90.99 billion, translated into an augmented operating profit of CNY49.89 billion, a rise from CNY41.63 billion registered a year earlier.
Kweichow Moutai’s core brand sales saw a commendable 19% year-over-year upsurge, reaching CNY59.28 billion.
This surge in performance occurs against the backdrop of a challenging economic scenario for China, marked by a rapid decline in exports. Recent figures reveal a 14.5% dip in exports and a 12.5% deceleration in imports, figures that proved bleaker than economists’ forecasts.
However, industry observers are confident that Kweichow Moutai will remain unfazed by the broader slowdown, with analysts predicting the baijiu giant to continue its upward trajectory throughout the year. This anticipation is grounded in Moutai’s entrenched position within China’s drinking culture and its ability to maintain higher consumer prices even amid the pandemic.
Notably, Moutai holds the distinction of being the largest consumer product share listed on China’s markets, with a valuation of approximately US$330 billion. Morningstar, an investment firm, projects that the company’s shares will persistently advance in the wake of its second-quarter results, which underscored robust demand for Moutai and premium baijiu, despite the subdued economy.
Kweichow Moutai is actively introducing premium offerings and vigorously pursuing direct sales to consumers (DTC), a strategy yielding enhanced profit margins.
Consequently, Morningstar has revised its 2023 net profit forecast for Kweichow Moutai by 3%, now reaching CNY 75 billion.
Furthermore, the firm predicts a compound annual growth rate of 14.8% for net profit over the five-year period until the close of 2027, a noteworthy increase from its previous projection of 13.7%.
