Kweichow Moutai’s Full-Year Results in Line; 2023 Continues to See Solid Growth

We raise our fair value estimate for wide-moat-rated Kweichow Moutai slightly to CNY 1,680 per share, from CNY 1,620 per share, after the company’s in line 2022 results and robust growth outlook. We expect Moutai to post a 16.5% year-over-year net profit growth in 2023 to CNY 73.0 billion, up slightly from our earlier forecast of CNY 72.5 billion. We expect Moutai to continue to benefit from twin drivers: 1) steady demand growth, underpinned by Moutai’s premium quality and its irreplaceable position in the Chinese drinking culture; and 2) rising average selling prices, driven by a shift to higher margin direct-to-customer, or DTC, channels. In addition, a more comprehensive product mix upgrade of series products, particularly the expanding sales of high-end series product Moutai 1935, will accelerate sales growth of series products and widen margins. We think all these will further strengthen Moutai’s competitiveness in the baijiu market and enhance earnings and long-term growth. We expect Moutai’s net profit to grow at a five-year CAGR of 13.7% over the next five years.