Kweichow Moutai is the most famous Chinese brand of alcoholic beverages, considered the national drink in China.
Zhang Peng | LightRocket | Getty Images
BEIJING – The largest stock on the mainland Chinese market “A share” is an alcoholic beverage company that analysts are betting on long-term, despite its sinking in the last month.
Kweichow Moutai sells “baijiu” which has an alcohol content between 43% and 53% and can cost about a few hundred US dollars per bottle. Baijiu – literally “white spirits” – is a key element in the Chinese business dinner and government to establish relationships and offers.
The stock has fallen by about 1% so far since Monday morning, keeping earnings in 2020 at around 70%.
Earlier this year, the rapid rise in the price of the stock attracted memes on the Internet, comparing it to the GDP of Chinese cities and the high price of bitcoin. Bitcoin cryptocurrency has grown by over 80% this year to over $ 60,000.
Moutai’s share price has risen 30 percent since December 31 to a record high just before the Lunar New Year, in mid-February, when it reached a market value of $ 500 billion. This was shaken by more than $ 100 billion in the weeks since then, as shares fell by more than 20% amid a large sell-off of Chinese shares.
But Kweichow Moutai still has a higher rating than any other continental A-share, including the giant ICBC bank, according to Wind Information.
Moutai is the strongest brand in the state-of-the-art baijiu market and will increase its share even as China’s beverage culture disappears, said Luo Hao, capital analyst at Global Capital Investment at China Asset Management.
He pointed to the company’s steady growth and profitability for investors as reasons for favoring the shares.
Moutai expects to generate operating income of about 97.7 billion yuan ($ 15.1 billion) last year, up 10 percent from the coronavirus pandemic. The company is expected to release the final results for 2020 later this month, according to Bernstein analysts.
Growing foreign property
The wind data showed that, as of March 11, the stock of alcoholic beverages had the highest number of non-continental institutions investing in it among the A shares, 101 companies holding 7.7% of the total market share. This resulted only from a handful of firms earlier this year, the database showed.
Moutai and another baijiu producer, Wuliangye, are the top two members of MSCI’s China A index, followed by many foreign funds looking to invest in China.
“We have a positive long-term view of China’s Ultra Premium Baijiu. We expect a higher growth in the value of the industry to be driven by higher revenues, which will continue to drive trading accessibility,” Bernstein analysts said in a statement This one.
While preferring Wuliangye to Moutai because of supply chain and governance issues, Bernstein analysts still have a “buy” rating on Moutai and a target price of 2,500 yuan per share. That’s more than 20 percent of Moutai’s closing price of 2,026 yuan per share on Friday.
– Michael Bloom of CNBC contributed to this report.