From CNBC: 2024-06-23 09:07:09

Prices of the Chinese alcohol brand Kweichow Moutai’s “Flying Fairy” are dropping, causing concerns about economic growth. Wholesale prices have fallen over 30% since September 2021. Despite this, Morningstar analysts believe the company’s wide profit margins and market value will buffer against immediate impact on earnings. Wedding and luxury spending declines also contribute to the decrease in demand.

Investor sentiment has shifted with Moutai’s stock decline, showing investors are not rushing in to buy as they have in the past. Despite this, some like Ye Yuhua see opportunity in the price drop. The company’s new chairman emphasizes mutual growth with distributors, which Huatai Financial Holdings sees as a positive indicator of future potential. Analysts maintain buy ratings with price targets above current levels.

An expected increase in wholesale prices in the fall due to major Chinese holidays may bolster Moutai’s profits. Second quarter baijiu demand is typically low, compounded by wedding declines in alignment with decreased marriage registrations in China. Despite this, Morningstar’s Jennifer Song maintains that Moutai shares are slightly undervalued, with significant undervaluation only occurring if share prices decrease substantially.



Read more at CNBC: China growth worries have hit Moutai. Some see opportunity