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Kweichow Moutai Co., Ltd. (600519.SS)
- Equity
- China
- Consumer Defensive
RISK
RETURN
Key risk factors
Negligible price volatility
Strong & resilient to price shocks
Good trading liquidity
Key return factors
Very strong margins and returns
Solid dividends
Greatly overvalued vs peers
Company profileKweichow Moutai Co., Ltd. produces and sells wine and liquor products in China and internationally. It offers aged, ordinary, and other Maotai liquor products. Kweichow Moutai Co., Ltd. was founded in 1999 and is based in Renhuai, China.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
27.00
23.80
PEG
2.80
-
P/B
8.80
6.30
P/S
14.60
12.00
P/FCF
31.00
30.90
EV/EBITDA
18.90
16.20
From both historical and forecast perspectives, the stock is considerably overpriced compared to similar stocks. In particular, the stock is reasonably priced on P/E, 'expensive' on EV/EBITDA, and overvalued on P/FCF.
Performance: Mixed
The stock has been falling steadily in the past six months, losing 5% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 6ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. The stock outperformed these peers by 5ppts over the past six months and grew 5ppts slower in the past month. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Somewhat favourable
The average target price is 2318 and suggests 38% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 2488.0. This translates into 48% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 1789.0. This suggests 7% upside potential. Even the most pessimistic analyst believes there will be stock growth.
Profitability: Very strong
RoE
Kweichow Moutai Co., Ltd. reported a return on equity (RoE) of 34.3% in the last 12 months, down from 36.2% in FY23. The market consensus projects an RoE of 38.7% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 27.9% in the last 12 months, a decrease from 28.4% in FY23. The market analysts predict that RoA will be 30.8% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 33.0%, above the peers. The consensus estimate for FY24 for RoCE is 51.4%, again ahead of the peers.
Net margin
EBITDA margin
Historically, 600519.SS has reported very strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 54.1%, a growth from 51.8% in FY23. The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 75.0% in the last 12 months, up from 71.9% in FY23.
RoIC / WACC = 5.8(excellent value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 5.8 in the past several years. This ratio implies a excellent shareholder value creation. Growth: Good
Revenue
EBITDA
EPS
Free cash flow
600519.SS reported revenue of CNY 144 262mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 4% from FY23 to CNY 62.10. Market expects EPS to reach CNY 70.26 in FY24.Revenue growth has been constrained in the past several years (negative-to-neutral), while EBITDA growth has been steady. This all contributed to continued EPS growth (positive-to-neutral). FCF has grown rapidly, much better than EBITDA. We emphasize the highly volatile dynamics of FCF. On the positive side, revenue, EBITDA and EPS dynamics is very stable.
Dividends: Solid
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends annually.
Default risk: Moderate
The risk of default is moderate. We note strong positions in its industry, robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, and poor working capital management.
Volatility: Negligible
In normal market circumstances, 600519.SS is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. We would also like to highlight the negligible intraday volatility of the instrument.
Stress-test: Negligible
In highly turbulent market conditions, 600519.SS is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.
Selling difficulty: Low
600519.SS boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains mildly favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Low
The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.
Other risks: Negligible
No other major risks have been identified.