A research report from UBS Securities points out that the wholesale prices of Moutai and Wuliangye may fall by 50% and 17% respectively by the end of 2025, and are expected to stabilize in 2026. If the analysis by UBS Securities holds true, there is still a significant room for the share price of Kweichow Moutai to decline in the future.
The report from UBS Securities indicates that Kweichow Moutai has a large inventory of aged liquor, with continuous expansion of production capacity, and a significant decrease in the number of people drinking white liquor. Without a genuine resolution to channel inventory issues, it is difficult for the performance growth of white liquor companies to be sustained. The benefits brought by the high-end market of white liquor may be offset by industry oversupply and a reduction in the drinking population.
Researchers from Hua Chuang Securities, a domestic firm, have released the latest in-depth research report on Kweichow Moutai. The report estimates that Kweichow Moutai's earnings per share for the next three years will be 70.30 yuan, 78.96 yuan, and 87.22 yuan, respectively, and maintains a target price of 2600 yuan for Kweichow Moutai along with a "strong buy" rating.
In order to maintain its share price, Kweichow Moutai has implemented quantity control and price protection measures for Moutai liquor and announced the cancellation of the "case-breaking order." Although the quantity control and price protection are temporarily effective, the annual 15% increase in production volume for Kweichow Moutai is inevitable.
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On August 2 last year, Ding Xiongjun, the former chairman of Kweichow Moutai Group, revealed that Moutai has stored hundreds of thousands of tons of base liquor in its cellars, "if calculated according to the current market value, it is several trillion." According to Kweichow Moutai's 2022 annual report, the inventory of aged liquor is 278,000 tons, which can be used to produce 560 million bottles of Moutai liquor. It is estimated that about 200 million bottles of aged liquor have been sold.
Kweichow Moutai's base liquor production in 2023 is 57,200 tons, and the production of series liquor base is about 42,900 tons. Together, they add up to about 100,000 tons. Calculated based on 57,200 tons, it is approximately 114 million bottles. The current ex-factory price of Moutai is 1169 yuan, so the annual increase in output value is 133.3 billion yuan. According to Kweichow Moutai's plan during the "14th Five-Year Plan" period, after reaching production, Kweichow's annual production capacity will reach 76,000 tons, and with other base liquor production, it can reach 150,000 tons, which is 300 million bottles. With an annual production of 300 million bottles, will Kweichow Moutai still be a luxury item, and how much collection value does it have?
It can be seen that the decline in Kweichow Moutai's share price is not due to the research report from UBS Securities, but rather the huge inventory of Moutai liquor and the continuously increasing production volume. Additionally, the significant decrease in the number of people drinking is also a factor. Last year, China's new population was only 9.02 million, while Moutai liquor's future annual production is 300 million bottles, which is somewhat frightening to think about.
Due to the pressure from distributors to stock up on Kweichow Moutai liquor, the wholesale price remains high. Moutai 1935, launched by Kweichow Moutai at the beginning of 2022 with a guidance price of 1188 yuan, is now selling at a real price of 800 yuan per bottle, showing a "price inversion" phenomenon. If Moutai liquor did not have distributors stockpiling, would this situation also occur?
Kweichow Moutai is not only a good gift but is also considered a luxury and collectible item. With an annual production of 300 million bottles of Moutai liquor in the future, will it still be a luxury and collectible item?
Whether it is a Swiss high-end watch or an LV bag, these high-end luxury goods are irreplaceable in terms of craftsmanship and materials used. However, Moutai liquor is a consumer product that can be infinitely replicated. The huge inventory and an annual production of 300 million bottles are indeed too much pressure.Regarding the future development of Kweichow Moutai, the former chairman, Ding Xiongjun, left a statement before his departure: "The lack of consumer confidence in the industry is 'not a cyclical issue, but a generational issue'." This statement points out the problem with Moutai in the future, as fewer and fewer people are drinking Moutai.
The above is only my personal opinion and should not be taken as investment advice. Any actions taken based on this information are at your own risk, and any profits or losses are your own responsibility.