iMoutai platform becoming a near-term catalyst
- Moutai released its 1H22 key headline numbers. Sales in 1H22 grew by 17% yoy to
- Rmb59.4bn, and net profit rose by 20% yoy to Rmb29.7bn, 49% of our FY22F full-year forecast, in line, driven mainly by the iMoutai platform’s strong sales contribution.
- The detailed financial results for 1H22F will be released on 3 Aug.
- We expect the company’s sales to grow 15.6% yoy, with net profit up by 16.3% yoy in FY22F.
- Reiterate Add with an unchanged DCF-based TP of Rmb2,218
Strong sales in 2Q22 despite the Omicron impact
According to the announcement, the company’s baijiu sales in 1H22 grew by 16.9% yoy to Rmb57.4bn. Sales in 2Q22 grew by 15.1% yoy to Rmb25.1bn, after 18.4% yoy growth in 1Q22. 2Q is usually a low season for baijiu sales, and this year’s 2Q22 also had the significant Omicron impact, but the Company still delivered solid results. We attribute the good results to the following: 1) The iMoutai platform, launched on 31 Mar, gave consumers more ways to purchase Moutai products, particularly during the severe pandemic period in Apr and May. Sales of tailor-made Moutai products on the iMoutai platform drove sales growth in 2Q22. 2) The company launched the small bottle (100ml) of 53°Feitian Moutai on 19 May on iMoutai, which indirectly increased the average selling price of Feitian Moutai products, with an ex-factory price of Rmb379 per 100ml vs. Rmb969 per 500ml. So Moutai brand sales rose by 14.6% yoy to Rmb21bn in 2Q22, accounting for 84% of baijiu sales. Sales of the series brands grew by 19% yoy to Rmb4.1bn in 2Q22, driven mainly by volume growth from the new Moutai 1935 product.
iMoutai platform playing a bigger role
According to Shanghai Securities News dated on 10 Jul, during the 100 days from 31 Mar to 9 Jul, the number of registered users on the iMoutai platform reached 19m, with an average of over 2.8m daily subscription users making preorders and about 4m daily active users. Sales of the new Moutai 1935 product reached Rmb900m, and the company also sold 1.2m small bottles (100ml) of 52°Feitian Moutai, with a retail price of Rmb399 per bottle, generating revenue of Rmb500m. Based on our estimates, sales on the iMoutai platform reached c.Rmb4bn, accounting for 15% of total baijiu sales in 2Q22. We also noted that the iMoutai platform launch did not affect other distributor channel operations and that the first-layer wholesaler price of 53°Feitian Moutai remained stable at Rmb2,745 per bottle. The iMoutai platform is a good way for the company to spread the Moutai culture and strengthen its brand image among young consumers so that the company can increase the price range of its products in the future.
More new products to be launched soon
At the beginning of the year, the new chairman, Mr. DING Xiongjun, said the company will strengthen Moutai’s distinguished products and make Moutai and Series brand products available in all price ranges of over Rmb2000, Rmb1000–2000, Rmb500–1000 and Rmb200–500 in the future. We expect the company to accelerate the reorganization of the product structure and reposition the pricing system of its products. For example, the company has positioned its new Moutai1935 product aiming at the Rmb1000–2000 baijiu consumption market.
Reiterate Add with an unchanged DCF-based TP of Rmb2,218
We reiterate our Add rating for Moutai, which is our top pick for the baijiu sector, as it initiated a couple of measures to accelerate distribution channel reforms and has made effective progress. A downside risk is that the weak macro environment might affect super premium baijiu sales. A positive catalyst would be stronger-than-expected sales growth and margin expansion. Our TP is derived from DCF valuation (WACC:10%).