On April 22, the official account of the financial magazine published a signed article by the author Li Tingzhen, with the title clear: Moutai can still play. After combing through Kweichow Moutai's financial reports from 2018 to 2023, the author systematically answered many market concerns about Moutai.
The article said that since April, Feitian Moutai has been "unbearable" singing empty information, endlessly.
Feitian Moutai is the core product of Kweichow Moutai Co., Ltd., with sales of more than 100 billion yuan. The industry said that it could not stand up, referring to the continuous decline in the terminal price of its bulk 500ml bottle (the price of a single bottle in a whole box, but slightly more expensive by hundreds of yuan).
In a panic, the terminal price of Feitian Moutai in the past few days has risen again.
The author of the article believes that there is no industrial product in the world whose price will rise forever. At present, liquor has entered the off-season of sales and consumption, and the price fluctuates, which is normal. However, due to Feitian Moutai's special leading position, its every move can cause deep anxiety in the liquor market. "To put it bluntly, what the market is worried about is not the imaginary price red line, but the unstoppable flooding. ”
He said that this anxiety is not groundless. According to data from the China Liquor Association and the National Bureau of Statistics, the total output of China's liquor industry in 2023 will be 6.29 million kiloliters, down 5.1% year-on-year, and the total output of enterprises above designated size will be 4.492 million kiloliters, down 2.8% year-on-year.
In Chengdu "Spring Sugar" in March this year, the participating media and analysts generally believe that although the epidemic has long ended, the demand for liquor has not yet fully recovered, and the inflection point on the demand side has not yet arrived, and it is difficult to predict how long the recovery period will take.
On April 2, shortly after the closing of "Spring Sugar", Kweichow Moutai released its 2023 annual report, and various data are still bright.
Even so, the market rumors of "terminal price fluctuations" still caused its stock price to plummet for a time, and even drove the entire liquor sector to plummet.
The "herd effect" is an irrational collection of pressure and emotions in the capital market, with various tramplings and sometimes lack of logic. What rational investors need to seriously analyze is, why can Kweichow Moutai still grow at a high speed with such a huge volume? Does the quality of its growth contain water and hidden dangers? Behind the decline in the terminal price of Feitian Moutai, does it really reflect that Kweichow Moutai has encountered a growth bottleneck?
The author of this article systematically sorted out the financial reports of Kweichow Moutai from 2018 to 2023, in order to uncover the mystery of various market views.
The fundamentals remain solid
What is the performance of Kweichow Moutai in 2023, please see Table 1.
Table 1.Kweichow Moutai performance from 2018 to 2023
Data source: the company's annual reports over the years, compiled and calculated by Caijing
Table 1 shows that in 2023, Kweichow Moutai's revenue and net profit will continue to maintain double-digit growth: revenue of 150.56 billion yuan and net profit of 77.52 billion yuan, all of which have a growth rate of more than 18%, both of which are the highest growth rates since 2019.
Among them, there should be a little credit for the increase in product prices. On November 1, 2023, the ex-factory price of 53% Feitian Moutai was increased by 20%, which directly increased the company's performance. However, the benefit time is only two months.
Compared with 2018, affected by the 18% increase in ex-factory prices at the end of 2017, Kweichow Moutai's revenue growth rate was as high as 26.43%, and the net profit growth rate was as high as 30.42%. Since then, Kweichow Moutai has never run at such a high speed.
The author of the article inferred that if there is no accident, this year should be the biggest profit year for this round of Moutai price increases, and believes that 2024 may be the "second peak" of profit growth since 2018. ”
Kweichow Moutai's gross profit margin in 2023 will be as high as 91.96%, and the net profit margin will be 52.49%, which is the highest in the history, while the gross profit margin of other A-share industries and companies will be about 30%, and the net profit margin will be about 10%.
Kweichow Moutai's return on assets (ROA) in 2023 will be as high as 29.4%, and the return on equity (ROE) indicator will be as high as 36.2%, both of which are the highest values in history.
However, Kweichow Moutai's net-present ratio (net-present ratio = net cash flow from operating activities/net profit) has been lower than 1 for two consecutive years. In 2022, it will be 0.56, and it will rise to 0.86 in 2023, and it seems that the gold content of net profit is not high.
Generally speaking, the sharp decline in the net cash ratio is mostly caused by the company's use of credit sales to stimulate revenue, and the balance sheet will have a huge increase in "accounts receivable" and "notes receivable".
But judging from the screenshot 1 below (from Kweichow Moutai's 2023 annual report), this is not the case, or even the opposite.
So why is Moutai's net present ratio less than 1? The answer given by the author of this article is taxes and fees. Liquor is a high-tax commodity, and in addition to value-added tax and income tax, it also needs to pay a huge consumption tax. The consolidated cash flow statement of the 2023 annual report shows that Kweichow Moutai's cash expenditure of various taxes and fees is as high as 66.68 billion yuan, of which consumption tax is 17.63 billion yuan.
As can be seen from screenshot 2 below (from Xueqiu), from 2022 to 2023, the projects with the largest net outflow and the highest increase in the cash flow of Kweichow Moutai's operating activities are all "taxes and fees paid", of which the increase in 2022 is as high as 39%, which directly leads to the shrinkage of the net cash ratio.
In addition, the board of directors of Kweichow Moutai resolved to distribute cash dividends of 38.8 billion yuan in 2023. Since its listing in 2001, Kweichow Moutai has paid dividends to shareholders 25 times, with a cumulative amount of 232.65 billion yuan, and the dividend financing ratio is as high as 10,566%.
The author of the article believes that such a sustained and high-yield "cash cow" is also auspicious when looking at the global capital market.
Even with such generosity, as of the end of 2023, Kweichow Moutai still has 173 billion yuan of "undistributed profits" in its consolidated balance sheet.
The lagging enjoyment of shareholders has turned into important assets on the left side of Kweichow Moutai's balance sheet - financial assets other than liquor assets alone, which are as high as 120.9 billion yuan, accounting for 44% of total assets, as shown in Table 2.
Table 2.Partial assets of Kweichow Moutai's consolidated balance sheet (yuan)
Data source: The company's 2023 annual report, compiled and calculated by Caijing
This article proposes that although the average return of these highly liquid financial assets is difficult to compare with that of liquor assets, they are the "winter grain" to resist the unpredictable risks of the liquor industry.
In addition, Kweichow Moutai also has cash assets of 69.07 billion yuan on its accounts and no interest-bearing liabilities.
The authors of the article believe that common indicators such as the asset-liability ratio, current ratio, quick ratio, and interest protection ratio, which measure the company's solvency, are almost meaningless for asset-light companies like Kweichow Moutai.
In terms of products, Kweichow Moutai's sales are very stable, see Table 4.
Table 4.Kweichow Moutai's product sales volume and sales in 2023
Data source: The company's 2023 annual report, compiled and calculated by Caijing
As can be seen from Table 4, whether it is Moutai or a series of liquors, its sales volume and sales have increased, and the sales growth rate is much higher than the sales growth rate.
This article proposes that this shows that both Moutai and series of liquor have achieved both volume and price, and the products are still greatly high-end.
In the annual report, Kweichow Moutai wrote: Kweichow Moutai continues to consolidate its position as the world's only 100 billion yuan liquor single product; Moutai 1935 created an "industry miracle" and became a large single product with a revenue of 10 billion yuan after only two years of listing; Moutai Prince Liquor has a single product revenue of more than 4 billion yuan, and the revenue of Han sauce, Guizhou Daqu and Lai Mao has exceeded 1 billion yuan respectively, forming a thousand, 100 and 1 billion yuan large single product pattern, and the product matrix has been comprehensively constructed.
Moutai 1935 is a high-end liquor in a series of liquors, which is laid out at a price of 1,000 yuan, which has a huge impact on high-end liquors at the same price.
According to the plan of Moutai Group, the revenue of Moutai series liquor will reach more than 24 billion yuan by the end of the "14th Five-Year Plan". Judging from the sales performance of 20.6 billion yuan and the growth rate of 29.43% in 2023, there is no big problem in achieving it, see Table 5.
Table 5 Sales status of Kweichow Moutai series liquor over the years
Data source: The company's 2023 annual report, compiled and calculated by Caijing
The author of the article believes that the series of liquor has become another growth pole for Kweichow Moutai to maintain its lead. Feitian Moutai is China's No. 1 ultra-high-end liquor. On top of Feitian Moutai, there are still a large number of ex-factory unit prices much higher than its "non-standard Moutai", such as boutique Moutai, Zodiac Moutai, vintage Moutai, scattered flowers Feitian, commemorative wine, 100ml small packaging Moutai, etc., forming a huge product matrix that has greatly increased the value of Moutai.
Orient Securities (600958. SH) said that in 2021, the proportion of non-standard Moutai in Kweichow Moutai's liquor business revenue has reached about 39%. This is a staggering percentage, but the report does not provide detailed evidence.
The article proposes that the substantial increase in the sales proportion and amount of these non-standard products should be a major reason for the continuous increase in profits of Kweichow Moutai (another factor is direct sales), see Table 6.
Table 6.Trends in sales volume and tonnage price of Moutai
Data source: the company's annual reports over the years, compiled and calculated by Caijing
As can be seen in Table 6, after an 18% price increase in 2018, the tonnage price of Moutai reached 2.02 million yuan. According to the ex-factory price of 969 yuan/bottle (including 13% VAT) at that time, the price per ton should be 1.82 million yuan (969/1.13*2124 bottles).
From 2019 to the end of October 2023, the price of Moutai has not increased again, but its ton price has soared to 3.01 million yuan in 2023.
Among them, the substantial increase in sales of non-standard Moutai has contributed a lot. And this logic, there is a high probability that it will continue to increase Kweichow Moutai's revenue and profits in the future.
In Kweichow Moutai's revenue in 2023, Moutai is as high as 126.6 billion yuan, an increase of 17.39% year-on-year, accounting for 86% of the total revenue of the liquor sector of 147.2 billion yuan.
In China's high-end liquor annual plate of 80,000 tons, Kweichow Moutai firmly occupies most of the country with an annual sales volume of 42,000 tons. In the case that the ex-factory price and retail price of other high-end liquor are all upside down, even if the terminal price of Moutai falls to 2,500 yuan, it is 1,331 yuan higher than the ex-factory price of 1,169 yuan.
If the basic disk is like this, what is the reason for the decline?
The author of the article believes that the fluctuation of the terminal price of Moutai will not have any impact on the company's value, but will expand sales, seize the market share of competitors, and have a direct dimensionality reduction blow to competing products.
Many people probably only remember that Moutai is a peerless bottle. But they have forgotten a cruel reality: in the rapid reform and opening up, Kweichow Moutai is a fierce general in the market economy. Countless competitors, under its squeeze, have long fallen in a pool of blood.
The proportion of "direct sales" has risen sharply
The article said that another highlight of Kweichow Moutai's 2023 annual report is that the proportion of "direct sales" has increased significantly.
In the company's financial report, the "sales model" is described as follows: "The company's products are sold through direct sales and wholesale agency channels. Direct sales channels refer to digital marketing platform channels such as self-operated and 'i Moutai', and wholesale agency channels refer to channels such as social dealers, supermarkets, and e-commerce", see screenshot 4 below (from Kweichow Moutai's 2023 annual report).
The "self-management" in this article mainly includes two parts: one is the business of 36 directly operated stores in charge of Kweichow Moutai Sales Company, and the other is the group purchase business for large customers that Moutai Group Marketing Company is responsible for. The self-operated part, plus the "i Moutai" digital platform operated by Kweichow Moutai, is all direct sales business.
As can be seen from screenshot 4, in 2023, the direct sales revenue will be 67.2 billion yuan, the wholesale agency will be 80 billion yuan, and the direct sales will account for 45.7%, which is almost equally divided.
In the company's prospectus in 2001, Kweichow Moutai once introduced, "The company's product sales mainly rely on more than 300 dealers distributed throughout the country. In 2000, the five largest dealers accounted for approximately 13% of the company's total sales. ”
According to this article, these social dealers are all small businessmen, mainly divided into general dealers, regional dealers, special dealers, and the "Moutai store" (property rights belong to dealers) that dealers are responsible for. The annual quota of each distributor ranges from 5 tons to tens of tons, and the annual quota of Moutai stores is 3 tons to 5 tons, which is highly flat (Table 7).
Table 7.Sales and share of the top five customers of leading liquor companies in 2022 (reflecting the degree of flattening)
Data source: annual reports of each company, compiled and calculated by Caijing
The author of the article pointed out that the supply and demand pattern of Moutai in short supply, as well as the fragmentation of the small business system of distributors, have jointly created a strong position of Kweichow Moutai, which paves the way for the smooth implementation of its direct sales strategy. Kweichow Moutai's core business model is to make and sell liquor, and it has been in short supply for a long time, and its performance is easy to predict. Whoever gets the scarce distribution quota will have the corresponding sales and profits.
The article believes that through the efforts of two directions, Moutai has won more space: one is to seek cooperation with national shopping malls and supermarkets and regional shopping malls and supermarkets, and provide a small amount of Moutai liquor supply for the other party at the ex-factory price of 1299 yuan and 1399 yuan per bottle, but require the other party to sell it at the manufacturer's guide price of 1499 yuan per bottle (classified into the wholesale agency channel). Its purpose is to stabilize the terminal price in the market, and the second is to provide group customized liquor for large enterprises and institutions at the ex-factory price of 1499 yuan/bottle, focusing on group consumption (classified as direct sales).
This article argues that whether part of the quota is allocated to direct sales, or the annual production increment is all classified as direct sales, both are directly increasing the revenue and profits of Kweichow Moutai. Even, there are no corresponding costs and expenses for the increased income, and after deducting taxes and fees, it is a net profit.
Table 11.Comparison of gross profit margins of various businesses of Kweichow Moutai (%)
Data source: the company's annual reports over the years, compiled and calculated by Caijing
Table 11 shows the comparison of the gross profit margin of various businesses of Kweichow Moutai from 2018 to 2023. The conclusion is that the gross profit margin of direct sales > gross profit margin of Moutai liquor> gross profit margin of Kweichow Moutai liquor> gross profit margin of Kweichow Moutai company> gross profit margin of wholesale agents.
The article said that this means that the direct sales business can drive the company's average gross profit margin up, while the wholesale agency business has led to a decrease in the company's average gross profit margin.
This is the basic financial logic of Kweichow Moutai's enthusiasm for direct sales. The biggest highlight of Kweichow Moutai's direct selling sector is the "i Moutai Digital Marketing APP" launched in the first half of 2022. This highlight has borne fruit in 2023. In 2023, it will achieve direct sales revenue of 22.374 billion yuan, a year-on-year increase of 88.29%. At present, it has gathered 65 million users, accounting for 33% of the revenue of the direct sales segment.
However, "i Moutai" does not sell 500ml Feitian Moutai, but focuses on differentiated products, mainly selling Moutai 1935, Moutai Zodiac wine, 100ml small bottles of Moutai, ice cream and other products.
It is worth noting that in 2023, Kweichow Moutai relies on the direct sales model, and its revenue growth rate is slowing down significantly, from 105% in 2022 to 36% in 2023, see Table 12.
Table 12.Comparison of the growth rate of the two sales models of Kweichow Moutai from 2018 to 2023
Data source: the company's annual reports over the years, compiled and calculated by Caijing
According to the author of the article, this probably means that the two sales models will soon reach a dynamic equilibrium in the future. This balance is exactly the goal pursued by Kweichow Moutai.
At the 2022 Annual General Meeting of Shareholders held on June 13, 2023, Ding Xiongjun, Chairman of Moutai Group, proposed that "one of the characteristics of ecology is balance. Moutai's various channels should be maintained at an optimal balance point, so that the value of different channels can be fully utilized. ”
The article proposes that, in fact, the traditional dealer channel still occupies an absolute share despite its slow growth. The amazing pull of Kweichow Moutai brand does not mean that the channel thrust is dispensable. In particular, the series of liquors that have become another growth pole, because the brand value is not as good as Moutai, it needs to be promoted by channels. In 2023, Kweichow Moutai's sales expense ratio will soar by 41%, and the increase should be mainly used for the promotion of a series of liquors that are urgently needed to be promoted by channels, as shown in screenshot 5 below (from Kweichow Moutai's 2023 annual report).
The authors of the article also noted that the sales expense ratio of Kweichow Moutai over the years has maintained a low level that is difficult to achieve in the same industry (see Table 13). For the rest of the leading liquor companies, this data is around 15%, while for individual companies, the sales expense ratio is close to 30%. According to the authors, this phenomenon proves that Moutai has a strong potential in terms of competition.
Table 13.Kweichow Moutai sales expense ratio from 2018 to 2023
The author of the article believes that the solid fundamentals and the "series of liquors" that maintain the leading position will continue to grow under the drive of the strengthened direct sales model.
However, in his opinion, Kweichow Moutai's running model is difficult for other companies to imitate. The essence of products in short supply and oversupply is completely different.
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