KWEICHOW MOUTAI(600519)2024-07-02 15:02Investment Rating - The report assigns a "Buy" rating for Kweichow Moutai (600519.SS) with a 12-month price target of Rmb2,244.00, indicating an upside potential of 52.9% from the current price of Rmb1,467.39 [80]. Core Insights - Recent volatility in wholesale prices is attributed to deeper seasonal discounts via online platforms, waning speculative demand, increased direct sales, and weak retail sentiment during the Dragon Boat Festival [105][106]. - Moutai's wholesale prices have historically rebounded after significant drawdowns, indicating resilience in consumer demand despite current price fluctuations [106]. - The report highlights that Moutai offers the highest distribution profits among Chinese baijiu brands, with channel gross profits exceeding Rmb1,000 per bottle compared to less than Rmb100 for other spirits [106]. - The affordability ratio of Moutai's original-case wholesale price is at 41% of urban disposable income, aligning with the 10-year average, suggesting long-term support for price levels as urban incomes grow [106]. Summary by Sections Wholesale Price Trends - Recent measures by Moutai, including ceasing the open-case policy and controlling shipments, have led to a 10% increase in wholesale prices for unpacked and original case Feitian Moutai [115]. - The report notes that Moutai's shares have declined by 9.3% in June, contrasting with MSCI China's decline of 2.7% and CSI300's decline of 3.3% [105]. Online Sales and Market Penetration - Online sales in the spirits category remain under-penetrated, accounting for approximately 11% of total spirits retail sales in 2023 [5][126]. - Moutai's online sales have increased significantly, contributing 16.1% of its total revenue, while other brands like Wuliangye and Laojiao have lower online sales percentages [126]. Channel Actions and Market Dynamics - Moutai has implemented various channel actions to stabilize prices, including suspending direct sales to enterprise group-buy channels and controlling prepayments [115][143]. - The report emphasizes that the current market dynamics, including the actions taken by Moutai, are expected to enhance its valuation and provide a better investment opportunity [108].