---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 200882
conversation_id: 3082ef34-3f6c-434d-a593-28b1b45bc2df
citations: 18
created: 2026-05-31 21:42:35Z
---

# What’s the bull case bear case for Kweichow Moutai?

# Kweichow Moutai (600519 CH) — Bull / Bear Case

Synthesis from CLSA internal research (Apr–Jun 2025) and Moutai's FY2025 Annual Report. CLSA's most recent stance is **Outperform (O-PF)** with a **12-month target price of RMB 1,718** (~+9% potential from May-2025 close) [6], a clear downshift from the 2023–24 BUY ratings (peak TP RMB 2,326).

The narrative arc in the corpus is important: through 1Q25 CLSA was constructive on the FY target, but a Henan baijiu-policy crackdown in May 2025 introduced a new, hard-to-quantify near-term overhang [7][8]. The FY2025 annual report (released early 2026) confirmed the worst of the bear set-up — **EPS actually fell 4.34% YoY** in 2025 [13], the first decline in years.

---

## Bull Case

### 1. Operating momentum was still positive into 1Q25
- **1Q25 revenue/profit +11%/+12% YoY**, ahead of CLSA and consensus and tracking ahead of the FY 9% target [1].
- Adjusted for prepayment changes, **sales were up 19% YoY** in 1Q25 [1].
- **GPM 92.0%** — still industry-leading even with a marginal 0.7ppt YoY narrowing — and opex ratio contracted 1.8ppt to 20.6% on lower business tax & management ratios [2].

### 2. Pricing power & brand scarcity remain intact
- Management argues Moutai's "scarcity will remain due to production limits" — Chairman Zhang frames the current macro/policy backdrop as a transition the brand can absorb thanks to "solid quality culture, creativity and self-adjustment strategy" [5].
- **Brand Finance China 500 2025**: Moutai ranks #1 in spirits with brand value **USD 58.38bn (+16.5% YoY)**, AAA+ brand strength rating; MSCI ESG upgraded BBB→A (first Chinese baijiu name to achieve A) [17].
- CLSA's bear-case PE anchor (15x) is benchmarked against the 2013–16 anti-corruption era and they note Moutai's "high-end brand power remains strong and the impact from slowdown will not be that severe as anti-corruption period" [3].

### 3. Direct-channel reform and overseas growth
- **Direct sales +20% YoY in 1Q25**, driven by non-iMoutai channels — consistent with management's push to expand 2C touchpoints [1].
- **International revenue +38% YoY in 1Q25** (vs. domestic +10%), although overseas is still only ~3% of liquor sales [2]. In FY2025, gross margin in the overseas channel reached **91.69%**, marginally above domestic 91.21% [16].

### 4. Shareholder returns are accelerating
- **75% dividend payout** (FY2024) implying a 3.3% yield at the time [11]; CLSA flagged this as the new committed payout level [11].
- FY2025 proposed dividend: **RMB 27.993/share** for the second tranche → total cumulative cash dividends "expected to amount to RMB 650.33bn (incl. proposed 2025 dividend), reaching a record high" [14][17]. Company also completed its **first RMB 6.0bn share repurchase** [17] — share count dropped 0.31% YoY [13].

### 5. Valuation framework (CLSA)
- **Base case 20x 12M-fwd PE** (in line with 2016–19 pre-Covid average); **bull 25x**, **bear 15x** [3].
- Current PE sits well below the bull-case multiple, leaving room for a re-rate if the policy overhang lifts.

---

## Bear Case

### 1. Henan baijiu policy: a sharp, real demand shock
- CLSA expert call (10 Jun 2025): **baijiu sell-through in Henan fell 30% YoY in May 2025**, hitting high-end premium brands hardest [7].
- Drinking by public servants and SOE employees has effectively stopped under strict Central Inspection Team supervision; trigger event was a local Henan official dying from drinking on the job [8].
- **Mid-Autumn Festival outlook is weak** — the expert expects only marginal sequential improvement and a low base [9 reference reference link]; long-term demand "still intact" but recovery hinges on policy execution easing post-July [10].

### 2. Wholesale prices are softening across the board
- Baijiu Wholesale Price Index **-0.6%**; **Moutai wholesale price -0.6%** (CLSA-tracked snapshot, 10 June 2025); Wuliangye **-1.5%**, Luzhou Laojiao **-1.1%** [9].
- Channel inventory rose sequentially as brands kept shipping while sell-through cratered — a textbook destocking-cycle setup [9].

### 3. FY2025 results confirm the slowdown materialized
- **EPS RMB 65.66 vs RMB 68.64 in 2024 → -4.34% YoY**, the first headline decline in recent history [13].
- **ROE collapsed 3.49ppt to 32.53%** (from 36.02%) [13].
- Quarterly cadence visibly weakened: revenue stepped down from Q1 RMB 50.6bn → Q2 38.8bn → Q3 39.1bn → Q4 40.4bn; net profit slid from Q1 26.8bn → Q4 17.7bn [implied from quarterly disclosure].
- **Net cash from operating activities fell sharply** — driven by reductions in deposits accepted by Moutai's finance subsidiary and rising interbank deposit lock-ups [13].

### 4. Inventory and sell-in/sell-out divergence
- FY2025: liquor **production +11.25% YoY (116.1kt)** but **sales volume only +2.13% YoY (85.1kt)** — **inventory +9.67% YoY to 339,978 tonnes** [18].
- Finished-liquor inventory at end-2025 = 24.8kt; semi-finished/base liquor = 315.2kt (vs ~5yrs of cellaring lead time) — production is running well ahead of throughput.
- **Series-liquor revenue fell 9.76% YoY** even as production was scaled up 19.82% — the down-tier brands (Moutai 1935, Wangzi) are facing acute consumption downgrade [15].

### 5. Channel mix shows distribution stress
- **Wholesale-agency revenue -12.05% YoY** in FY2025, gross margin compressed 1.56ppt to 87.86% [16].
- Direct sales +12.96% revenue but operating costs +31.07%, gross margin -0.75ppt to 94.58% [16] — the direct channel is buying growth with margin.
- **iMoutai (digital direct) sales fell 30% YoY in 4Q24** and management is steering back to traditional distributors after Mr Zhang Deqin's appointment [11].

### 6. Key formal risks (CLSA-listed)
- Slower-than-expected consumption recovery
- Unfavourable government policies (now realized in Henan)
- Delayed ex-factory price hikes
- Weaker-than-expected sales volume release [4]

### 7. Rating downgrade trajectory
CLSA's TP path: **RMB 2,326 (Jan-2024 BUY) → 2,187 (May-24) → 1,818 (Jun-24 first cut to O-PF) → 1,718 (Nov-24, reiterated Apr/May 2025)** — a cumulative 26% target-price reduction in ~16 months [6], reflecting structural de-rating of the high-end baijiu cycle.

---

## Investment Calculus

| Dimension | Bull | Bear |
|---|---|---|
| Brand power | World-class moat, scarcity-protected ASP [17] | Anti-corruption-era analogy could compress PE to 15x [3] |
| FY2025 results | 75% payout, RMB 28/share H2 dividend [14] | EPS -4.34%, ROE -3.5ppt [13] |
| Volume | Production +11% YoY, capacity expanding [18] | Sales +2%, inventory +10% — destocking ahead [18] |
| Pricing | Wholesale still > ex-factory, room intact | Index -0.6%, premium hit hardest [9] |
| Policy | Long-term demand "still intact" [10] | Henan -30% sell-through, no clarity post-July [7][10] |
| Valuation | 20x base / 25x bull = upside [3] | 15x bear = ~25% downside from base [3] |

**The crux**: Moutai is no longer a clean compounder story. The bull case requires patience for the policy-driven consumption-scenario reset to stabilize, with the dividend (3.3%+ yield) and brand moat serving as carry. The bear case is now partially confirmed by the 2025 reported earnings decline and rising inventory, and could deepen if wholesale prices break a key psychological band or if the policy crackdown extends beyond Henan.

---

**Sources**
[1] Kweichow Moutai — O-PF (1Q25 slight beat) — CLSA (29 Apr 2025) — 607957506LinqAlpha.PDF
[2] Kweichow Moutai — O-PF (1Q25 slight beat) — CLSA (29 Apr 2025) — 607957506LinqAlpha.PDF
[3] Kweichow Moutai — O-PF (1Q25 slight beat) — CLSA (29 Apr 2025) — 607957506LinqAlpha.PDF (valuation methodology)
[4] Kweichow Moutai — O-PF (1Q25 slight beat) — CLSA (29 Apr 2025) — 607957506LinqAlpha.PDF (investment risks)
[5] Kweichow Moutai — O-PF (Shareholder meeting takeaways) — CLSA (19 May 2025) — 607959909LinqAlpha.PDF
[6] Kweichow Moutai — O-PF (Shareholder meeting takeaways) — CLSA (19 May 2025) — 607959909LinqAlpha.PDF (TP/rating)
[7] China baijiu (Expert call on baijiu policy) — CLSA (10 Jun 2025) — 607961641LinqAlpha.PDF
[8] China baijiu (Expert call on baijiu policy) — CLSA (10 Jun 2025) — 607961641LinqAlpha.PDF
[9] China baijiu (Expert call on baijiu policy) — CLSA (10 Jun 2025) — 607961641LinqAlpha.PDF (wholesale price table)
[10] China baijiu (Expert call on baijiu policy) — CLSA (10 Jun 2025) — 607961641LinqAlpha.PDF (post-July recovery)
[11] Kweichow Moutai — O-PF (4Q24 results and 2025 target in line) — CLSA (2 Apr 2025) — 607954929LinqAlpha.PDF
[12] Kweichow Moutai — O-PF (4Q24 results) — CLSA (2 Apr 2025) — 607954929LinqAlpha.PDF (FY24 breakdown)
[13] Kweichow Moutai Co., Ltd. — Annual Report 2025 (Key Financial Indicators: EPS, ROE)
[14] Kweichow Moutai Co., Ltd. — Annual Report 2025 (FY2025 dividend proposal)
[15] Kweichow Moutai Co., Ltd. — Annual Report 2025 (Product profile: Moutai vs series liquor)
[16] Kweichow Moutai Co., Ltd. — Annual Report 2025 (Regional & channel breakdown)
[17] Kweichow Moutai Co., Ltd. — Annual Report 2025 (Brand value, MSCI ESG, buyback)
[18] Kweichow Moutai Co., Ltd. — Annual Report 2025 (Production/sales/inventory volumes)

## Citations

- [1] **607957506LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957506LinqAlpha.PDF>
- [2] **607957506LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957506LinqAlpha.PDF>
- [3] **607957506LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957506LinqAlpha.PDF>
- [4] **607957506LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957506LinqAlpha.PDF>
- [5] **607959909LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959909LinqAlpha.PDF>
- [6] **607959909LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959909LinqAlpha.PDF>
- [7] **607961641LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961641LinqAlpha.PDF>
- [8] **607961641LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961641LinqAlpha.PDF>
- [9] **607961641LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961641LinqAlpha.PDF>
- [10] **607961641LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961641LinqAlpha.PDF>
- [11] **607954929LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607954929LinqAlpha.PDF>
- [12] **607954929LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607954929LinqAlpha.PDF>
- [13] **贵州茅台2025年年度报告（英文版）** · external
- [14] **贵州茅台2025年年度报告（英文版）** · external
- [15] **贵州茅台2025年年度报告（英文版）** · external
- [16] **贵州茅台2025年年度报告（英文版）** · external
- [17] **贵州茅台2025年年度报告（英文版）** · external
- [18] **贵州茅台2025年年度报告（英文版）** · external

