Kweichow Moutai (600519.SS) Conference Call Summary Company Overview - **Company**: Kweichow Moutai - **Stock Code**: 600519.SS - **Industry**: Spirits Key Points Market-Oriented Operation Plan - Kweichow Moutai announced a shift to a more market-driven pricing framework to optimize channel investments and safeguard profitability, focusing on demand dynamics [1] - The new strategy includes: 1. Adjusting product portfolio to a pyramid structure by pricing tier 2. Transitioning from a traditional sales model to a multi-dimensional model including direct sales, distribution, agency, and consignment 3. Expanding sales channels to include online, offline retail, restaurants, and private VIP clients 4. Implementing a market-oriented pricing system for various sales models [1] Pricing Adjustments - Suggested retail prices (RSP) for key SKUs: - Feitian Moutai vintage (2019-2024): Rmb1,909 to Rmb2,659 per bottle - Feitian Moutai 2026: Rmb1,499 per bottle - Non-standard Moutai SKUs: RSP cut by approximately 20-30% [1] - Ex-factory prices for distributors of key non-standard Moutai products reduced by 7-37% [1] Impact on Channel Profitability - Price adjustments are expected to stabilize the wholesale price system, boost distributor confidence, and improve market supply/demand dynamics [2] - Estimated channel margins for Jingpin Moutai and Moutai 15-Year now approach 20% following the adjustments [2] - The adjustments are anticipated to expand market share and consumer base for strategic SKUs, solidifying flagship products' market status [2] Sales Volume and Earnings Revisions - Sales estimates revised down by 5-9% for 2025-2027, primarily due to lower Moutai spirits volume and softer ASP trends [7] - Expected sales/NP decline of -1%/-2% in 2025 and -1%/-1% in 2026 [7] - The 12-month price target is revised down to Rmb1,553 from Rmb1,691, maintaining a "Buy" rating [7] Theoretical Sales Impact Analysis - The pricing and volume quota adjustments could imply up to Rmb30 billion sales reduction in 2026 [6][12] - Improved supply/demand dynamics and better product affordability are expected to create favorable conditions for wholesale price recovery and retail sales rebound in the second half of 2026 [6] Product Matrix Strategy - Moutai is restructuring its product offerings into a pyramid structure: 1. Base tier: Feitian Moutai 500ml 2. Mid tier: Jingpin and Zodiac 3. Apex tier: Vintage spirits with controlled shipments to enhance value [17] Channel Strategy - Moutai is developing five parallel sales channels: wholesale, offline retail, online retail, catering, and private traffic, focusing on an integrated online and offline transformation [21] Risks and Challenges - Key risks include potential regulatory changes, environmental concerns, slower macroeconomic recovery, capacity constraints, and volatility in US interest rates [37] Conclusion - Kweichow Moutai's strategic shift towards a market-oriented pricing model and channel expansion aims to enhance profitability and market share amidst changing consumer dynamics and industry cycles [2][20]

Summary of Kweichow Moutai Conference Call Company Overview - **Company**: Kweichow Moutai (600519.SS) - **Industry**: China Consumer Staples Key Points and Arguments 1. Market Adaptation and Pricing Strategy - Kweichow Moutai aims to implement a more commercialized pricing system by adapting to market conditions and prioritizing market-oriented transformation, including pricing adjustments for 2026 [1] - The company plans to maintain stable overall supply to match demand, avoiding high price fluctuations, and will reduce allocation of higher-priced non-standard SKUs [1] 2. Product Supply and Quota Adjustments - Overall supply will remain stable in 2026, with dynamic adjustments to the product mix based on market conditions [1] - Specific strategies include: - Reducing non-standard Feitian SKUs (100ml/200ml/1000ml) to increase market share of standard Feitian - Upgrading Jingpin Moutai quality to strengthen its position as the second major SKU - Decreasing quotas for Zodiac and Vintage Moutai, and discontinuing Caiyou Zhenpin supply [1] 3. Pricing Expectations - Management emphasized the need for reasonable and stable price expectations to avoid high fluctuations in wholesale prices of Feitian and other Moutai products [1] - The company will promote "price marketization reform" focusing on market conditions and volume-price balance [1] 4. Channel Development - Moutai will enhance channel diversity and expand its customer base by monitoring market and channel capacity to reduce inventory pressure [1] - The company plans to build integrated online-offline and traditional-modern complementary channel networks, leveraging the i-Moutai platform [1] 5. Consumer Experience and Service Enhancement - Focus on enhancing consumer experience and strengthening the channel ecosystem resilience [1] - Plans to deploy "three stores and one center" (flagship stores, image stores, specialty stores, and cultural experience centers) and build a comprehensive anti-counterfeiting system [1] 6. Financial Performance and Price Target - Recent improvements in wholesale prices for various Moutai products, with Original case Feitian Moutai's price rising to Rmb1,560 per bottle from Rmb1,495 [6] - The company maintains a Buy rating with expected sales and net profit growth of 4% and 3% for 2025 and 2026, respectively, with a target price of Rmb1,691 based on a 23.4x 2026E P/E [6][10] 7. Risks and Challenges - Key downside risks include potential regulatory changes, environmental pollution, slower macroeconomic recovery, capacity constraints, and volatility in US rate hikes [9] Additional Important Information - The company is focusing on long-term value creation through reasonable profit distribution and healthy channel development [5] - Moutai is establishing professional teams to enhance service quality, including training specialists in various roles [5] This summary encapsulates the essential insights from Kweichow Moutai's conference call, highlighting the company's strategic direction, market adaptation, and financial outlook.

Summary of Kweichow Moutai Conference Call Company Overview - **Company**: Kweichow Moutai (600519.SS) - **Industry**: Chinese Spirits Industry Key Points from the Conference Call Distribution Strategy Changes - **Suspension of Shipments**: December shipments to distributors will be suspended until January 1, 2026, to bolster distributor confidence and prevent aggressive sell-downs for cash turnover [1][2] - **Quota Cuts for Non-standard SKUs**: Significant cuts in distribution quotas for non-standard Moutai SKUs are expected in 2026, with reductions of 30% for Moutai 15 years and 1L Moutai, 50% for Zodiac, and 100% for Zhenpin Moutai compared to 2025 [1] - **Re-evaluation of Pricing**: Pricing levels for these non-standard SKUs will be re-evaluated based on market conditions [1] - **Exploration of New Distribution Models**: The company is considering shifting from a wholesaler model to an agent model to better control supply and channel profitability [1] Promotion of Jingpin Moutai - **Price Reduction**: The ex-factory price for Jingpin Moutai will be lowered to approximately Rmb2,000 per bottle from Rmb2,699, with an increase in volume quota for 2026 [1] - **Marketing Actions**: Effective marketing strategies will be implemented to promote Jingpin Moutai [1] Financial Implications - **Sales Reduction Estimate**: The volume quota cuts for non-standard SKUs could lead to an estimated sales reduction of up to Rmb20 billion, which represents about 10% of 2025 sales [2] - **Offsetting Factors**: This reduction is expected to be offset by increased sales from Jingpin Moutai, new distributor recruitment, and other channel reforms [2] Distributor Confidence and Financial Stress - **Strengthening Distributor Confidence**: The meeting aimed to alleviate financial stress among distributors by pacing shipments and cutting loss-making non-standard SKUs, which constituted about 30-40% of prepayments in 2025 [2] - **Optimization of Distribution Channels**: The company plans to optimize direct-sales channels and explore online sales models to enhance overall channel profitability [1] Market Outlook - **Sales and Net Profit Growth**: Goldman Sachs maintains a Buy rating, expecting 4% sales growth and 3% net profit growth in 2025 and 2026, respectively [2] - **Valuation Metrics**: The stock is trading at 19x 2026 estimated earnings with a dividend yield of approximately 4% [2] Additional Insights - **Channel Profitability**: Non-standard SKUs have been recording losses due to consistently dropping wholesale prices, with Feitian Moutai's wholesale prices weakening to below Rmb1,600 [1][2] - **Market Positioning**: The company is strategically positioning itself to stabilize the wholesale pricing system for Feitian Moutai through various reforms and optimizations [2] This summary encapsulates the critical insights and strategic directions discussed during the Kweichow Moutai conference call, highlighting the company's proactive measures to enhance distributor confidence and optimize its product offerings in a challenging market environment.