KWEICHOW MOUTAI(600519) 品牌方舟·2024-10-07 16:08Key Points Industry or Company Involved: - Kweichow Moutai (600519.SS), the largest and most premium China spirit player Core Views and Arguments: 1. Sustainable Growth and Resilience: Kweichow Moutai's iconic brand value, sustained pricing power, and unique brand cachet position it to navigate through cycles and solidify its market share. 2. Scarcity of Resources: Moutai's unique flavor and production process, with a long fermentation and blending cycle, contribute to its scarcity and premium pricing. 3. Premium Pricing and Brand Power: Moutai's brand power drives premium pricing and strong channel profitability, with Feitian Moutai's wholesale price significantly higher than its ex-factory price. 4. Financial Performance: Moutai has demonstrated superior financial performance, with above-industry margins and a strong return on capital. 5. Blue Sky Outlook: Moutai is expected to double its overall value share in the China spirits industry to 45% by 2035E, driven by high-end spirits demand and sauce-flavor spirits popularity. Other Important Points: 1. Bear Case: Assuming no volume growth, Moutai's valuation suggests a downside risk of 17%. 2. Base Case: Assuming stable volume and ASP growth, Moutai's valuation suggests a 17% upside. 3. Blue Sky Scenario: Assuming upside in the 2030-35E outlook, Moutai's valuation suggests a 41% upside. 4. Regulatory Risks: Consumption tax reform could impact Moutai's profitability and valuation. 5. Environmental Pollution: Pollution of the Chishui River and surrounding area could negatively impact Moutai's product quality and brand power. 6. Capacity Constraints: Moutai's capacity additions are crucial for long-term growth. 7. Channel Reshuffle: Increasing supply of Feitian Moutai and additional discounts on e-commerce platforms could disrupt traditional distribution channels. Key Financial Metrics: - Revenue CAGR: 9.5% over 2023-35E - Net Profit Margin: 55% by 2035E - Net Cash: Over 100% of total equity by 2035E - Dividend Payout: 75% in 2024-26E - Free Cash Flow Yield: 11.2% by 2035E Valuation: - Target Price: Rmb2,051 - DCF-based Implied Valuation: Rmb2,461 - Dividend Discount Model: Implies a share value of Rmb1,634 Conclusion: Kweichow Moutai is a resilient and well-positioned company with strong growth prospects. Its unique brand value, premium pricing, and superior financial performance make it an attractive investment opportunity. However, investors should be aware of potential risks, including regulatory changes, environmental pollution, and capacity constraints.