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Optimistic On Premium And Leading Sub-premium Names

Kweichow Moutai plans to boost the sales volume of Moutai brand products during the Mid-Autumn Day and National Day holidays to stabilise Feitian Moutrai’s retail prices. The wholesale prices of premium and sub-premium baijiu remain high, indicating solid customer demand ahead. We are optimistic on high-end baijiu companies’ healthy
fundamentals, and reckon that the current valuation levels are attractive. We maintain OVERWEIGHT on the baijiu sector.

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WHAT’S NEW

Boosting shipment to stabilise Moutai’s retail prices. According to local news, Kweichow Moutai will put more than 8,000 tonnes of Moutai brand products into the market during this year’s Mid-Autumn Day and National Day holidays. In 2017-20, the company put 4,500 tonnes, 7,000 tonnes, 7,400 tonnes, and 7,400 tonnes respectively of Moutai brand products into the market during these two festive holidays. Previously in early-Sep 21, the company’s direct sales stores launched the subscription of Moutai products. Online platforms such as JD and Suning have also started the subscription of Moutai products. Moreover, the company has continued its unboxing policy for Feitian Moutai. As a result, the wholesale price for a single bottle of Feitian Moutai dropped below Rmb3,000/bottle to Rmb2,980/bottle
on 14 Septembe, which has happened several times since Aug 21. In contrast, the wholesale price for a whole box of Feitian Moutai remained high at around Rmb3,850/bottle in Sep 21. We believe Moutai’s wholesale price is less likely to see a downward trend given the strong customer demand.

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Wholesale prices for premium and sub-premium baijiu remained high. Besides Moutai, other premium and sub-premium baijiu wholesale prices have also remained at relatively high levels. Wuliangye’s wholesale price remained high at Rmb975/bottle, and Guojiao 1573’s wholesale price remained at Rmb910/bottle. According to Wejiu’s survey, national brands’ sub-premium baijiu, such as Shuijingjian, Zhenniang 8, Pinwei Shede, saw a relatively small ytd increase in wholesale prices. In contrast, the wholesale prices of regional brands’ sub-premium baijiu, such as Gu 16/20 and Guoyuan Sikai saw a higher ytd increase.

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Optimistic on demand for high-end baijiu. According to Weijiu’s survey, inventory levels of most sales terminals in Jiangsu, Anhui, Hubei, Hunan, and Henan stand at two months’ shipment for now. However, we reckon that high-end baijiu’s inventory level would likely be below a 2-month shipment level as partly demonstrated by the high wholesale prices. Weijiu’s survey also showed that some distributors are optimistic on baijiu consumption during the National Day holidays as they have already confirmed many banquets orders during the long period of holidays, despite the relatively weak demand for now (one week before Mid-Autumn Day holiday). Also, some distributors stated that total shipment for the two festive holidays would likely exceed that in 2020, there are 10 days of holidays in 2021 vs eight days in 2020.

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New Moutai product. Kweichow Moutai has recently launched a new product named Moutai 1935. The ex-factory price is Rmb788/bottle and the official guided retail price is Rmb1,188/bottle. Kweichow Moutai will reportedly put around 600 tonnes of Moutai 1935 into the market during the two festive holidays. In addition, the annual output of Moutai 1935 will likely be 2,000 tonnes.