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 Kweichow Moutai Conference Call Company Overview - **Company**: Kweichow Moutai - **Industry**: Food Products (specifically Baijiu manufacturing) - **Market Cap**: Rmb1,805 billion / US$251 billion [6] Financial Performance - **H125 Results**: - Revenue: Rmb89.4 billion, up 9% YoY - Net Profit: Rmb45.4 billion, up 9% YoY - Q225 Revenue: Rmb38.8 billion, up 7% YoY, missing consensus by 2% - Q225 Net Profit: Rmb18.6 billion, up 5% YoY, missing consensus by 4% [2][10] - **Gross Profit Margin (GPM)**: Declined by 0.3 percentage points in Q225 due to a negative product mix [2] - **Operating Profit Margin (OPM)**: Down by 0.4 percentage points, influenced by a 0.5 percentage point increase in Selling & Distribution (S&D) ratio [2] - **Unearned Revenue**: Decreased to Rmb5.5 billion, down Rmb4.5 billion (-45% YoY) [2] - **Receivables and Inventories**: Increased by Rmb2.5 billion and Rmb7.2 billion YoY, indicating a longer working capital cycle and weak demand outlook [2] Segment Performance - **Moutai Liquor Revenue**: Grew by 11% YoY to Rmb32 billion, accounting for 82.6% of total revenue [3] - **Series Liquor Revenue**: Dropped by 7% YoY to Rmb6.7 billion, accounting for 17.4% of total revenue [3] - **Sales Channels**: - Direct Sales: Grew by 17% YoY to Rmb16.8 billion (43.3% of total revenue) - Distributor Sales: Grew by 2% YoY to Rmb22 billion (56.7% of total revenue) - iMoutai Sales: Largely flat at Rmb4.9 billion [3] Guidance and Outlook - **2025 Revenue Growth Target**: Approximately 9% YoY, unchanged from previous guidance [4] - **Investor Sentiment**: Expected to be negative due to the significant drop in unearned revenue and lackluster demand outlook [5] Valuation Metrics - **12-Month Price Target**: Rmb1,531.66 - **Current Price (as of 12 Aug 2025)**: Rmb1,437.04 - **P/BV (12/25E)**: 6.9x - **EPS Estimates**: - 12/25E: Rmb74.36 - 12/26E: Rmb79.45 - 12/27E: Rmb84.53 [7][9] Risks and Challenges - **Economic Downturn**: Potential impact on demand for premium Baijiu [13] - **Capacity Constraints**: Could hinder sales growth despite healthy demand [13] - **Government Regulations**: Possible negative effects on profitability [13] - **Food Safety Issues**: Risks to brand image [13] Additional Insights - **Market Performance**: 52-week range for stock price was Rmb1,748.00 - Rmb1,261.00 [6] - **Analyst Ratings**: Current rating is Neutral, with a forecast stock return of 11.2% [11][19] This summary encapsulates the key points from the conference call regarding Kweichow Moutai's financial performance, market outlook, and associated risks, providing a comprehensive overview for potential investors.