Kweichow Moutai Earnings: A Slightly Weaker Period but Robust Cash Flow Suggests Demand Is Intact

Wide-moat Moutai’s headline third-quarter results were slightly disappointing, with net profit growth slowing to 15.7% year on year, from 21.0% in the first half. We think this largely reflects a seasonal adjustment in supply, while the decent cash flow, particularly a 21% year-on-year growth in cash received from product sales and a CNY 4.6 billion increase in advanced payment to CNY 12.8 billion from a quarter ago, indicates that demand for Moutai is robust. The data bodes well for its fourth-quarter 2023 and first-quarter 2024 sales growth, in our view. We keep both our fair value estimate of CNY 1,730 per share, and our full-year net profit forecast of CNY 75.0 billion, representing 19.7% year-on-year growth in 2023.