Maintain Buy: Continued Progress in Market-Oriented Transformation

Overview

HSBC issued an earnings review on Kweichow Moutai. The report believes that second-quarter results were slightly below market expectations, affected by destocking of series liquor and pressure in the wholesale channel; however, market-oriented transformation, demand in direct-sales channels and recent price increases will support operational improvement in the second half.

Core views

The company is accelerating its market-oriented transformation by selling Feitian Moutai through iMoutai, shifting non-standard Moutai to a consignment model, and implementing multiple cross-channel price adjustments during the year, making its pricing system more dynamic. The report believes that the August increase in Feitian prices to RMB1,753 per bottle at offline directly operated stores reflects resilient demand and further progress in market-oriented pricing.

Analysis framework

The report analyzes earnings breakdowns, channel performance, product mix, price adjustments and comparable-company valuation, and derives its target price using a DCF model.

Methodology notes

• Valuation methodsDCF model

  Discounted cash flow valuation

  Valued using a WACC of 9.1% and a terminal growth rate of 4.0%; following earnings forecast cuts, the target price was adjusted from RMB1,732 to RMB1,713.

• Fundamental analysisChannel and product mix analysis

  Breakdown of direct sales, wholesale and product portfolio

  Changes in revenue from Moutai liquor versus series liquor, and direct-sales versus wholesale channels, are used to assess destocking, demand and margin movements.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Kweichow Moutai（600519.SS）

  Core covered company

  Strengths

  Strong demand in direct-sales channels and rapid iMoutai growth; Feitian price adjustments and market-oriented pricing reform help strengthen pricing management capabilities.

  Weaknesses

  Series liquor remains in destocking, while wholesale channels have declined significantly; product-mix downtrading and lower average selling prices for non-standard Moutai weigh on gross margin.

  Comparison

  Its 2026 forecast P/E is 19.8x, below the 23.1x average of comparable companies listed in the report and close to the 20.3x median.

  Risks

  Wholesale-channel recovery slower than expected, prolonged destocking, price-increase effects falling short of expectations, or further deterioration in product mix.

Key data

• 1H26 revenue growth rate+1.3%Disclosed in the report.
• 1H26 net profit growth rate-2.0%Disclosed in the report.
• 2Q26 direct-sales revenue growth rate+34%iMoutai sales grew 283% year on year and accounted for approximately 83% of direct-sales revenue.
• 2Q26 wholesale channel growth rate-35%A significant drag on overall revenue.
• 2Q26 gross margin89.5%Down 1.1 percentage points year on year.
• 2026 forecast revenue growth+3.8%HSBC forecast.
• 2026 forecast net profit growth+2.9%HSBC forecast.
• 2026 forecast earnings per shareRMB67.75Down 1.0% from the previous forecast.

Impact & implications

If direct-sales growth continues, destocking of series liquor is gradually completed, and price increases are successfully passed through, the company's revenue and net profit growth in the second half could improve from the first half. In the near term, attention should still be paid to weak wholesale channels and pressure on gross margin from product-mix downtrading.

Risks

• Wholesale-channel demand and distributor destocking progress fall short of expectations.
• Weak sales of series liquor may continue to drag revenue growth.
• Product-mix downtrading and lower average selling prices for non-standard Moutai may continue to compress gross margin.
• Weaker-than-expected price pass-through or market-price volatility may affect the pace of earnings improvement.

What to watch

• Whether sales growth through iMoutai and other direct-sales channels can be sustained.
• Changes in series liquor inventory and distributor numbers, especially the pace of destocking in the wholesale system.
• Price adjustments for Feitian Moutai across wholesale, iMoutai and offline direct-sales channels, as well as end-demand feedback.
• Whether 2H26 revenue and net profit growth achieve the respective forecasts of 6.5% and 8.8%.
• Whether gross margin can stabilize after changes in the product mix.