Kweichow Moutai (.SS)_ FY24 Preliminary Results in Line; Moutai Spirits Momentum Maintained

Company and Industry Overview * Company: Kweichow Moutai (600519.SS) * Industry: Spirits and Liquor * Date: 2 January 2025 * Event: Preliminary results announcement for fiscal year 2024 Key Financial Highlights * Revenue: Rmb173.8bn, up 15.4% yoy * Net Profit: Rmb85.7bn, up 14.7% yoy * Implied 4Q24 Revenue: Rmb50.7bn, up 12.0% yoy * Implied 4Q24 Net Profit: Rmb24.9bn, up 13.8% yoy Revenue Breakdown * Moutai Spirits: Rmb145.8bn, up 15.2% yoy * Series Spirits: Rmb24.6bn, up 19.2% yoy Profit Margins * Implied NPM: 49.3%, down -0.3ppt yoy Production Volume * Moutai Spirits: 56.3k ton, -1.5% yoy * Series Spirits: 48.1k ton, up 12% yoy Key Developments * Wholesale Price: Original case Feitian Moutai's wholesale price/bottle maintained flattish at Rmb2,290. Unpacked Feitian Moutai's wholesale price/bottle decreased by Rmb10 to Rmb2,220. * Wholesaler Quota: Management intends to adjust the wholesaler quota of Feitian Moutai and various Moutai spirits SKUs to enhance channel penetration. * Series Spirits Sales Target: Management targets sales growth of series spirits in 2025 of not lower than the listco's average top line growth in the past five years (i.e. 14% sales CAGR in 2018-23). * Marketing Expenses: Management will increase series spirits related marketing expenses by Rmb1.5bn in 2025 (50%+ vs 2024). Valuation and Rating * Stock Price: Trading at 20x 2025 P/E with 3.8% dividend yield * Rating: Reiterate Buy rating * Price Target: Rmb1,990 based on a 26.5x 2025E P/E Key Risks * Regulation Changes: Potential regulation changes such as a consumption tax rate hike * Environmental Pollution * Macroeconomic Recovery: A slower-than-expected macroeconomic recovery * Capacity Constraints * US Rate Hikes: More volatility in US rate hikes given the negative correlation between Moutai's P/E and the US 10-yr bond yield