M Update 3Q25 Results in Line with Lowered Expectation Reaction to earnings October 29, 2025 02:45 PM GMT Kweichow Moutai Company Ltd. | Asia Pacific Unchanged In-line Modest revision lower Impact to our thesis Financial results versus consensus Direction of next 12-month Source: Company data, Morgan Stanley Research Key Takeaways Sales: In 3Q25, "Moutai" core brand sales rose 7% yoy, contributing to 89% of liquor sales (vs. 84% in 3Q24 and 83% in 2Q25). Series liquor fell 34% yoy. Direct sales were 40% of ...

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.