29 December 2025 | 11:23AM HKT Equity Research Kweichow Moutai (600519.SS): Aiming for more commercialized pricing system, stable supply in 2026 with products quota adjustment Moutai held its annual distributor meeting on Dec 28th in Guiyang. For 2026, which marks the beginning of China's 15th Five-Year Plan, Moutai will proactively adapt to market conditions, prioritize market-oriented transformation (including pricing system), maintain stable overall supply to match with overall demand to avoid high fluct ...

In response to the recent weak trend in Feitian Moutai wholesale price, Moutai held the distributor meeting on Dec 11th, and conveyed a message to distributors including: 1) Dec Shipment to distributors will be suspended until 1 Jan 2026 (prepayment has been completed), and the company will resume shipment in due time for 2026LNY. This is to strengthen the distributor confidence in near term to prevent aggressive sell-down for cash turnover in our view; 2) The distribution quota of multiple Non-standard Mou ...

8 December 2025 | 7:34AM HKT Equity Research 2) 2026 Prepayment policy and requirement vary by major brands: Moutai/Fen Wine will likely target 5% growth for 2026 with 2025 sales still aiming for positive growth, per the expert. Wuliangye/Fen Wine tentatively set 50%/40% of full-year prepayment for 1Q26 targeting positive volume growth for 2026 with the expert's company, while the effective prepayment price will likely be lowered to distributors especially by Wuliangye (Exhibit 1, effective prepayment price ...

Summary of Kweichow Moutai AGM Takeaways Company Overview - **Company**: Kweichow Moutai (600519.SS) - **Industry**: Consumer Staples, specifically alcoholic beverages Key Points from the AGM 1. **Sales Momentum Recovery**: - Month-on-month sales momentum for Moutai spirits improved since August, with positive year-on-year growth from September to November [1][6] - Shipments were moderately reduced from June to August to align with market demand, preventing excessive inventory buildup [1][6] 2. **Long-term Strategic Focus**: - Management emphasized strategic patience and long-term value creation to navigate the current cyclical adjustment in the industry [1][6] - The next five-year plan will focus on scientifically managing shipments to maintain channel health rather than irrational growth [1][6] 3. **Targeting New Consumer Demographics**: - The company aims to explore new consumer groups in emerging economies and younger generations [1][6] - Retail demand for high-end Moutai spirits has expanded, particularly during previous anti-graft cycles [1][6] 4. **Multi-faceted Growth Strategy**: - **Channel and Consumer Strategy**: Actively exploring new demographics and enhancing distributor capabilities to serve group-buy and end consumers [1][9] - **Production Management**: Plans to manage production capacity scientifically to increase high-quality base spirits output, building a reserve of aged spirits during downturns [1][9] - **Global Expansion**: Commitment to global expansion with a focus on Southeast Asia and Japan, aiming to introduce mid-range spirits for better affordability [1][9] - **New Product Exploration**: Actively trialing new products and enhancing direct consumer engagement through flagship stores [1][6] 5. **Financial Performance**: - Approved an interim dividend payout of RMB 30 billion and a share buyback plan of RMB 1.5 to 3 billion [1][6] - Current stock trading at 20x 2025/2026E P/E with a 3.6% dividend yield for 2025 [1][6] 6. **Risks Identified**: - Potential regulatory changes, environmental pollution, slower macroeconomic recovery, capacity constraints, and volatility in US interest rates [1][10] 7. **Valuation and Price Target**: - 12-month price target set at RMB 1,691 based on a 23.4x 2026E P/E, indicating a potential upside of 16.6% from the current price of RMB 1,450.50 [1][11] Additional Insights - The company is focusing on enhancing service experiences and emotional connections with consumers through tailored offerings and professional talent systems [1][9] - Moutai is integrating its products into various business and lifestyle scenarios to broaden consumption occasions [1][9] This summary encapsulates the key takeaways from Kweichow Moutai's AGM, highlighting the company's strategic direction, financial outlook, and market positioning.

Summary of China Spirits Tracker Conference Call Industry Overview - The spirits industry is currently facing challenges due to weakening demand influenced by anti-extravagance policies and a shift in the Mid-Autumn festival calendar, leading to a tough quarter for many companies in Q3 2025 [1][1][1]. - Companies are adopting a cautious outlook for the upcoming Chinese New Year (CNY) sales and earnings performance, primarily due to a high base effect and lingering policy impacts, resulting in low visibility on demand recovery [1][1][1]. Company-Specific Insights Kweichow Moutai - Moutai is pursuing growth targets mainly through wholesale channels, reporting a 14% year-over-year increase in sales for Q3 2025, despite a 15% decline in direct sales [1][1][1]. - The company is likely to adjust its growth targets for 2026 to be more rational due to pressures on wholesale prices from competitors [1][1][1]. Wuliangye - Wuliangye anticipates back-ended growth in 2026, with the first half of the year facing headwinds from a high comparative base [1][1][1]. - The wholesale price of Common Wuliangye has remained relatively stable, with a slight decrease of RMB 5 to RMB 855 per bottle [2][2][2]. Luzhou Laojiao - Laojiao is also expected to maintain stringent shipment controls, focusing on channel health and pricing strategies into the first half of 2026 [1][1][1]. Feitian Moutai - The wholesale price of Original case Feitian Moutai has decreased by RMB 25 to RMB 1,675, while unpacked Feitian Moutai's price dropped by RMB 40 to RMB 1,640 [2][2][2]. - Various SKUs of Moutai have seen price reductions ranging from RMB 60 to RMB 120 per bottle [2][2][2]. Guojiao 1573 - The wholesale price for Guojiao 1573 has remained stable at RMB 850 per bottle, indicating a lack of significant price movement in the current market [2][2][2]. Market Dynamics - The spirits market is characterized by stringent shipment controls among leading premium brands, with a focus on maintaining channel health and pricing systems [1][1][1]. - The overall sentiment in the spirits industry remains cautious, with companies preparing for potential challenges in the upcoming quarters due to regulatory impacts and market conditions [1][1][1]. Performance Metrics - The stock performance of select spirits companies shows mixed results, with Kweichow Moutai and ZJLD being relatively better performers, while others like Jiangsu Yanghe and Jiugui Liquor have faced significant declines [35][35][35]. Key Risks - Potential risks include regulatory changes, such as consumption tax hikes, and a slower-than-expected macroeconomic recovery, which could impact the spirits market significantly [41][41][41]. This summary encapsulates the key points discussed in the conference call regarding the spirits industry and specific company performances, highlighting the cautious outlook and market dynamics as of Q3 2025.

Summary of Kweichow Moutai Company Ltd. Conference Call Company Overview - **Company**: Kweichow Moutai Company Ltd. - **Industry**: Consumer Goods, specifically high-end liquor - **Date of Call**: October 29, 2025 Key Financial Highlights - **Sales Performance**: - Core brand sales increased by 7% year-over-year (yoy) in 3Q25, contributing to 89% of total liquor sales, up from 84% in 3Q24 and 83% in 2Q25 [3][10] - Series liquor sales decreased by 34% yoy [3] - Direct sales accounted for 40% of liquor sales in 3Q25, down from 47% in 3Q24, indicating a 15% yoy decline [3] - Customer advances were Rmb7.7 billion in 3Q25, down from Rmb9.9 billion in 3Q24, reflecting ongoing channel de-stocking [3] - **Pricing Trends**: - Wholesale price of Feitian Moutai fell from approximately Rmb1,860 per bottle in September 2025 to Rmb1,700 in October 2025 [4] - Distributor payments were largely on track, with pre-payments for Feitian Moutai mostly completed [4] - **Margin Analysis**: - Operating margin expanded by 1.0 percentage point yoy to 66.3%, driven by a 1.0 percentage point reduction in selling expense ratio and a 0.4 percentage point decrease in general and administrative (G&A) expense ratio [4] - Gross margin contracted by 0.4 percentage points due to a higher sales tax ratio [4] - **Cash Flow**: - Cash flow from selling products increased by 2.6% yoy to Rmb44 billion [5] - Net cash position remained stable at Rmb173 billion in 3Q25 [5] Market Outlook and Strategic Insights - **Sales Growth Expectations**: - The company anticipates a possible lower sales target for 2026 compared to 2025, which could be viewed positively as it may alleviate channel stocking burdens and support pricing recovery [10] - **Inventory Management**: - The moderation in reported growth is seen as a positive move to prioritize disciplined inventory management, supporting long-term sustainable growth [10] Valuation and Price Target - **Current Stock Rating**: Overweight [7] - **Price Target**: Rmb1,785.00, representing a 25% upside from the closing price of Rmb1,431.90 on October 29, 2025 [7] - **Market Capitalization**: Rmb1,798,750 million [7] Risks and Considerations - **Upside Risks**: - Recovery in high-end liquor consumption sooner than expected and a faster rebound in Moutai's wholesale prices could drive further growth [14] - **Downside Risks**: - Continued decline in wholesale and retail prices of Moutai and weaker-than-expected performance of series liquor despite investments [14] Additional Notes - **Customer Advances**: The decline in customer advances indicates a potential slowdown in sales and inventory management challenges [3][10] - **Market Sentiment**: The current financial results align with market expectations, reflecting a proactive approach to managing channel pressures under weak demand [10] This summary encapsulates the key points from the conference call, focusing on financial performance, market outlook, and strategic insights for Kweichow Moutai Company Ltd.

Summary of China Consumer Staples 3Q25 Preview Industry Overview - The Consumer Staples sector in China is experiencing weak consumption trends in 3Q25, with easing policy headwinds but ongoing constraints on on-trade recovery [1][2] - Companies are prioritizing channel health and maintaining rational marketing investments due to weak demand, leading to volume weakness across sub-sectors [1][2] Key Insights - **Sales Growth Expectations**: An aggregated topline growth of +3%/+4% is anticipated for the Staples coverage (excluding Spirits), with beverages, pet foods, and snacks leading sales growth at 10-30% [2] - **Comparison to Previous Quarters**: This growth represents a deceleration from +5%/+7% in 2Q25, reflecting broader consumption weakness [2] - **Spirits Sector Outlook**: The spirits sector is expected to see a decline of -7%/-10% in sales/net profit, likely marking 3Q as the trough level due to stringent shipment controls [2] Company Performance - **Leaders Outperforming**: Companies like Eastroc, Nongfu, Haitian, CR Beer, Yankershop, and Weilong are expected to deliver resilient sales growth in 2H25 with higher margin visibility [2] - **Downgrade of Jonjee**: Jonjee has been downgraded to Sell from Neutral due to an 8-10% downward revision in earnings amid competitive pressure from Haitian [2] Market Trends - **September Sales Trends**: Beer and dairy sales trends improved sequentially ahead of Golden Week, while beverage and snacks showed wide divergence [2] - **Focus on Channel Health**: Companies are expected to focus on channel health and shipment control in preparation for a fresh start in 2026 [2] Future Outlook - **Investment Strategy for 2026**: Companies are expected to face diminishing cost benefits, necessitating a focus on competition and promotion strategies [8] - **Growth Drivers**: Selective snacks and beverage players are anticipated to drive topline growth through core SKU focus and POS expansion [8] - **Potential Recovery in Challenged Sectors**: Spirits valuations suggest a potential bottoming out, with recovery tied to gradual policy normalization expected in 2Q26 [8] Valuation and Shareholder Returns - **Valuation Outlook**: Investors are beginning to look into 2026/27E earnings, with pet food trading at an average of 28x/21x P/E compared to 38x for 2025 [8] - **Shareholder Return Support**: Companies like Tingyi and WH Group are noted for their attractive yields of 7-8% for 2025E/2026E [1] Conclusion - The Consumer Staples sector in China is navigating a challenging environment with weak demand and competitive pressures, but certain leaders are positioned to outperform. The focus on channel health and strategic investments will be crucial as the sector prepares for 2026.

Summary of China Spirits Tracker Conference Call Industry Overview - The report focuses on the **China Spirits Industry**, particularly during the **Golden Week holiday season** which includes the National holiday and Mid-Autumn festival - Sales momentum for liquor consumption remained weak year-over-year (YoY) in key regions such as **Hunan, Anhui, and Henan** [1][1][1] Key Insights - **Banquet Demand**: Banquets are identified as the only growth pillar for spirits brands, outperforming other consumption scenarios during the holiday season, especially in **Jiangsu** and **Henan** provinces [1][1][1] - **Gifting Demand Decline**: There was a notable decline in gifting demand, with high-premium moon cakes (priced over Rmb500) market share dropping to approximately **1.8%** in 2025 YTD from **7.2%** in 2023. Pre-festival sales of moon cakes decreased by over **45%** YoY [1][1][1] - **Retail Sales Performance**: Overall retail sales of key enterprises in retail and catering increased by **3.3%** in the first four days of Golden Week, compared to a **6.3%** increase during the Labor Day holiday in 2025 [1][1][1] Regional Sales Performance - **Anhui**: Retail-end sales likely declined by **20%-30%** during the double holiday, with banquet sales still in a YoY downward trend [1][1][1] - **Jiangsu**: Retail-end sales likely decreased by over **20%** YoY, although banquet sales outperformed other consumption scenarios [1][1][1] - **Henan**: Holiday retail-end sales likely saw a **10%-15%** YoY decline, with banquet sales possibly remaining flat [1][1][1] - **Sichuan**: Retail-end sales may decrease by **20%** YoY, with gift-sending/business-related sales down by **20%-40%** YoY [1][1][1] - **Hunan**: Pre-festival shipment volumes for major brands like Feitian Moutai and Wuliangye saw declines ranging from **12% to 31%** YoY [1][1][1] Brand Performance - **Moutai**: - Feitian sell-through remained flat YoY, while non-standard SKUs saw a decline of over **20%** YoY [1][1][1] - Wholesale prices for original case Feitian Moutai decreased from **Rmb1,810** to **Rmb1,780** [1][1][1] - **Wuliangye**: - 1618 and Wuliangchun performed positively YoY, while common Wuliangye sell-through declined by **10%-15%** YoY [1][1][1] - **Laojiao**: Guojiao sell-through declined by over **25%** YTD YoY in some regions [1][1][1] Pricing Trends - Post-festival, wholesale prices for key upper-premium SKUs like Feitian Moutai and Common Wuliangye trended weaker compared to pre-festival prices, marking the weakest performance in the past five years [1][1][1] - Channel inventory levels remained stable, with Wuliangye and Laojiao at less than **2 months** and **3 months** respectively, while Gujing faced high inventory pressure [1][1][1] Additional Developments - **New Retail Initiatives**: - Waima opened its first offline store in **Chongqing**, offering upper-premium spirits brands [1][1][1] - I-Moutai launched insta-delivery services, supporting intra-city delivery in as fast as **30 minutes** [1][1][1] - **Sales Performance in Zhejiang**: Wuliangye management reported stable performance in weddings and celebratory banquets in the Zhejiang market [1][1][1] Conclusion - The China Spirits industry is currently facing challenges with weak demand trends, particularly in gifting and general consumption, while banquet demand remains a critical growth area. Brands are adjusting their strategies in response to changing consumer behaviors and market conditions.

Summary of Conference Call on China Spirits Industry Industry Overview - The spirits industry in China is currently facing challenges due to the ongoing impact of the anti-extravagance policy, which has affected consumer demand and retail momentum. [1][2][11] - The third quarter of 2025 (3Q25) is expected to be the trough for the industry, with a projected sales decline of 5% to 27% across various brands, excluding Moutai and Jiugui. [1][2][21] Key Points and Arguments Demand and Sales Trends - Retail momentum is anticipated to remain weak, particularly during the peak season due to fewer holiday days compared to previous years. [1] - A significant decline in retail volume is expected, with estimates of a 30% drop in August and a 15-20% decline during the peak season. [11] - The wholesale pricing remains under pressure, with notable declines in prices for key brands like Feitian Moutai and Common Wuliangye. [19][27] Shipment and Inventory Management - Spirits companies are prioritizing channel health by implementing deeper destocking and tighter shipment controls to ease distributor financing burdens. [1][2] - The trend of controlling shipments is crucial for maintaining channel inventory and supporting wholesale prices, especially for high-end spirits. [18][27] Financial Forecasts and Revisions - Sales and net profit forecasts for super-premium and upper-mid-end spirits have been revised down by up to 6% and 17% respectively for 2025E-27E. [2][42] - Despite the cautious outlook, target multiples have been raised by 9-19% to reflect a more normalized valuation level amid market re-rating. [2] Product Strategy and Market Positioning - Companies are focusing on product strategy to navigate the current market challenges, including reinforcing mid-end and mass portfolios and innovating lower-degree liquor products for younger consumers. [11] - The emphasis on residential banquets and product mix shifts is seen as a potential catalyst for recovery. [11] Dividend and Shareholder Returns - There is potential for enhancement in shareholder returns, with increased dividend payout forecasts for companies like Wuliangye. [11][43] Additional Important Insights - The anti-extravagance policy's impact is expected to gradually normalize, potentially boosting sentiment during the 2026 Chinese New Year holiday season. [11] - The affordability of high-end spirits has improved, which may support residential demand as policy headwinds ease. [31] - The spirits sector has seen a rotation towards laggards, indicating a market sentiment shift towards recovery narratives. [12][42] Conclusion - The China spirits industry is navigating a challenging environment with significant policy impacts affecting demand and pricing. However, strategic adjustments in shipment control, product offerings, and potential improvements in affordability may provide pathways for recovery in the coming years. [1][2][11][12]

Summary of Kweichow Moutai Company Ltd. Conference Call Company Overview - **Company**: Kweichow Moutai Company Ltd. - **Ticker**: 600519.SS - **Industry**: China/Hong Kong Consumer - **Market Cap**: Rmb1,904,396 million - **Current Share Price**: Rmb1,516.00 - **Price Target**: Rmb1,785.00 (18% upside) [5] Key Industry Insights - **Anti-Extravagance Policy**: No further tightening observed since August, contributing to a narrowing year-over-year decline [2] - **Channel Inventory**: Stable inventory levels across the industry, with Moutai's channel inventory at approximately 1.5 months [8] - **Wholesale Price Trends**: Prices trended downward in July-August due to weak demand but began stabilizing towards the end of August [3][8] - **Distributor Payment Trends**: Moutai's distributor payments reached about 80% of the full-year sales target by the end of August, similar to the previous year [8] Financial Performance - **Revenue Projections**: Expected revenue growth from Rmb170.61 billion in FY 2024 to Rmb223.12 billion by FY 2027 [5] - **Earnings Per Share (EPS)**: Projected EPS growth from Rmb68.64 in FY 2024 to Rmb88.85 in FY 2027 [5] - **P/E Ratio**: Expected to decrease from 22.2 in FY 2024 to 17.1 by FY 2027 [5] - **Return on Equity (ROE)**: Expected to remain stable around 40% [5] Market Sentiment - **Stock Rating**: Overweight [5] - **Recent Performance**: Liquor stocks have increased by 17% since the end of July, indicating market optimism [8] - **Competitive Landscape**: Other major brands like Fen Wine and Yanghe are also experiencing similar trends in distributor payments and inventory levels [8] Risks and Considerations - **Demand Pressure**: Anticipated to persist over the next 3-6 months, necessitating careful control of shipment pace to maintain wholesale prices [8] - **Potential Upside Risks**: Faster recovery in high-end liquor consumption and wholesale prices could lead to a re-rating of Moutai's stock [17] - **Downside Risks**: Continued decline in wholesale and retail prices, along with intensified competition in the premium segment [18] Conclusion Kweichow Moutai Company Ltd. is navigating a challenging market environment with stable inventory levels and a focus on maintaining pricing power. The company is projected to achieve significant revenue and EPS growth in the coming years, supported by a favorable market sentiment despite potential risks related to demand and competition.