Kweichow Moutai Earnings: Sales Growth Accelerates, Fair Value Estimate Raised 3%

We raise our fair value estimate of Kweichow Moutai to CNY 1,730 per share from CNY 1,680, following the company’s decent second-quarter results, which revealed robust demand for Moutai and premium baijiu, despite the sluggish economy. The results were slightly ahead of our expectations, and we think product structure upgrade—with increased supply of premium Moutai products and high-end series product Moutai 1935—was the key boost. We expect Moutai to extend robust growth momentum in the second half and we raise our 2023 net profit forecast by 3% to CNY 75 billion. However, we think its shares are fairly valued, as of the Aug. 3 market close. And at the current levels, we think Luzhou Laojiao and Yanghe may offer a slightly better risk/reward, amid accelerating growth and a relatively lower valuation currently.