China growth worries have hit a big alcohol stock. Why some analysts see a buy opportunity

by | Jun 23, 2024 | Financial

Prices of a prestigious Chinese alcohol brand are falling, stoking worries about economic growth. “Flying Fairy,” a 53% alcohol from Shanghai-listed Kweichow Moutai , saw wholesale prices drop by more than 5% in a week. Those prices are now down by more than 30% since a Sept. 2021 peak, Nomura analysts said in a research report, noting that during a boom in housing prices from 2015 to 2021, Flying Fairy’s wholesale prices surged by nearly 360%. Also known as “Feitian Moutai,” the brand of traditional Chinese baijiu liquor, made from red sorghum, is a status symbol used for government gifts and seen at high-level business deals and weddings. That’s also given older bottles collector’s value . It’s less clear whether a decline in an apparent proxy on Chinese wealth means the company itself will be significantly hit. Wide margins Morningstar senior equity analyst Jennifer Song pointed out that Kweichow Moutai has maintained wide profit margins and that it has “plenty of room” to raise its ex-factory prices. Song said recent conversations with institutional clients revealed no change on their view of Moutai. Despite a 13% drop so far this year, Kweichou Moutai remains the largest stock by market capitalization in the Shanghai composite, making it a large part of exchange-traded funds tracking mainland Chinese stocks. By contrast, PetroChina , the second-large …

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[mwai_chat context=”Let’s have a discussion about this article:nnPrices of a prestigious Chinese alcohol brand are falling, stoking worries about economic growth. “Flying Fairy,” a 53% alcohol from Shanghai-listed Kweichow Moutai , saw wholesale prices drop by more than 5% in a week. Those prices are now down by more than 30% since a Sept. 2021 peak, Nomura analysts said in a research report, noting that during a boom in housing prices from 2015 to 2021, Flying Fairy’s wholesale prices surged by nearly 360%. Also known as “Feitian Moutai,” the brand of traditional Chinese baijiu liquor, made from red sorghum, is a status symbol used for government gifts and seen at high-level business deals and weddings. That’s also given older bottles collector’s value . It’s less clear whether a decline in an apparent proxy on Chinese wealth means the company itself will be significantly hit. Wide margins Morningstar senior equity analyst Jennifer Song pointed out that Kweichow Moutai has maintained wide profit margins and that it has “plenty of room” to raise its ex-factory prices. Song said recent conversations with institutional clients revealed no change on their view of Moutai. Despite a 13% drop so far this year, Kweichou Moutai remains the largest stock by market capitalization in the Shanghai composite, making it a large part of exchange-traded funds tracking mainland Chinese stocks. By contrast, PetroChina , the second-large …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
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