Wuliangye’s Q3 Growth Slowed but Cash Flow Robust, Maintaining FVE at CNY 188

Wuliangye’s third-quarter revenue and net profit rose 10.6% and 11.8%, respectively, a significant slowdown from the 20% revenue growth and 26% net profit growth posted in the first half of 2021. This is disappointing, which reflects a higher base a year ago and a relatively weaker consumption environment amid the pandemic related impacts. In addition, we think the company pushed more supply to channels in the first half, which led to destocking in the third quarter. Nevertheless, cash flow remains robust, and cash received from sales increased 59.4% year over year, outpacing revenue growth. Recent channel feedback shows inventory fell to less than one month, and more than 90% of the full year target was completed. In addition, wholesale price is also stable at CNY 970-CNY 980 per bottle. Distributors remain confident in Wuliangye's demand outlook, and we estimate full year sale volume to rise 10% from a year ago.