Kweichow Moutai is the most renowned Chinese liquor brand, regarded as the national liquor in China.
Zhang Peng | LightRocket | Getty Images
BEIJING — The biggest clichd in the mainland Chinese “A share” market is a liquor company that analysts are betting on for the long term, despite its engulf in the last month.
Kweichow Moutai sells “baijiu” which has an alcohol content of about 43% to 53% and can set someone back about a few hundred U.S. dollars per bottle. Baijiu — literally “white spirits” — is a staple at Chinese business and superintendence dinners for forging relationships and deals.
The stock was down about 1% year-to-date as of Monday morning, holding 2020’s obtains of roughly 70%.
Earlier this year, the stock’s rapid surge in price drew internet memes comparing it to the GDP of Chinese towns and bitcoin’s high-flying price. Cryptocurrency bitcoin has surged more than 80% this year to above $60,000.
Moutai’s parcel price had climbed 30% from Dec. 31 to a record high just before the Lunar New Year in mid-February, when it effected a market value of $500 billion. That’s been shaved by over $100 billion in the weeks since, as pieces fell more than 20% amid a broad sell-off in Chinese stocks.
But Kweichow Moutai still has a bigger valuation than any other mainland A cut stock, including the giant ICBC bank, according to Wind Information.
Moutai is the strongest brand in the high-end baijiu hawk and will grow its share even as China’s drinking culture subsides, said Luo Hao, equity analyst with Broad Capital Investment at China Asset Management.
He pointed to the company’s steady growth and returns for investors as reasons why he favors the funds.
Moutai expects it made about 97.7 billion yuan ($15.1 billion) in operating income last year, for broadening of 10% amid the coronavirus pandemic. The company is set to release final 2020 results at the end of this month, according to Bernstein analysts.
Become large foreign ownership
Wind data showed that as of March 11, the liquor stock had the largest number of non-mainland practices investing in it among A share stocks, with 101 firms holding 7.7% of the total market share. That’s up from lone a handful of firms earlier this year, the database showed.
Moutai and another baijiu manufacturer, Wuliangye, are the top two fellows of MSCI’s China A index, which is tracked by many foreign funds wanting to invest in China.
“We have a sure long-term view on the China Ultra Premium Baijiu. We expect superior industry value growth to be driven by swell incomes which will continue driving affordability led up-trading,” Bernstein analysts said in a note this month.
While they single out Wuliangye to Moutai due to supply chain and governance concerns, the Bernstein analysts still have a “buy” rating on Moutai and a worth target of 2,500 yuan a share. That’s up more than 20% from Moutai’s Friday closing reward of 2,026 yuan per share.
— CNBC’s Michael Bloom contributed to this report.