Wine and stock prices are both falling, does Maotai (600519.SH) need a "rescue"? Latest response

At the extraordinary general meeting held yesterday afternoon, the interim dividend and share repurchase plan of Kweichow Moutai (600519.SH) for the year 2024 were approved. This means that the company may start the repurchase as early as today, with a repurchase amount of 3-6 billion yuan, providing support for Moutai's relatively weak stock price. A reporter from Cailian News saw that the number of people attending this extraordinary general meeting was significantly fewer than the company's annual general meeting for the year 2023 held in May, with only about 300 people present. The shareholder communication session was relatively simple, and the time for communication was short, with the company management answering only three questions related to channel construction and internationalization. At the meeting, a GF SEC analyst pointed out that Moutai liquor seems to not be selling as well as in previous years. How will Moutai "relieve the pressure"? She gave an example of a Moutai distributor in Shanghai who contacted her last week about buying small bottles of Moutai, stating that this was the first time in her 10 years in the industry that a distributor had contacted her proactively. In response, Kweichow Moutai's General Manager, Wang Li, stated that there is currently no need for Moutai to "relieve the pressure." The issue Moutai faces is how to match supply and demand. Wang believes that the basic demand for Moutai liquor has not changed, and the company needs to focus on increasing consumer reach first before addressing conversion issues. To increase consumer reach, the company has proposed building a "4+6" channel system. This includes strengthening private domain channels in addition to self-operated channels, iMoutai, and group purchases; and enhancing traditional distributors, supermarkets, e-commerce, catering, and tobacco channels while considering their strengths and weaknesses, complementarity, and how to improve conversion rates. Wang believes that many Moutai shareholders are potential customers of the company, and there is room to explore this private domain flow. At the shareholder meeting, Moutai also provided a "little benefit" to attending shareholders. At the venue of the meeting - Moutai HK&S HOTELS' self-operated store, shareholders could purchase the Dragon Year Moutai Zodiac liquor and 1L Moutai liquor at the market-guided price (2499 yuan/bottle) with their IDs, with a limit of one box per person. Currently, the actual market price of Dragon Year Moutai Zodiac liquor is not much different from the market-guided price, with almost no premium space. However, on the iMoutai APP platform, the chances for ordinary users to purchase Dragon Year Moutai Zodiac liquor at the guided price are still very low, below 1%. The reporter noticed that despite the lack of a premium, many shareholders still choose to buy full boxes of "Dragon Moutai" and 1L Moutai liquor for reasons like authenticity. Regarding internationalization, Wang stated that the company plans to implement an internationalization strategy with the "six systems," including brand promotion, regulations, products, channels, prices, and sales policies, aiming to become an international company by 2035. During the shareholder meeting, the reporter from Cailian News exchanged views with several company shareholders. One of their most pressing concerns was the company's earnings guidance for next year. Some shareholders with a more pessimistic view believe that the company's revenue growth rate will drop to single digits next year; however, some shareholders believe that even with lower growth, the company can achieve at least double-digit growth. For the last year and the first three quarters of this year, Kweichow Moutai's net profit growth rate was 19.16% and 15.04%, respectively. As of November 27th, the Shanghai Composite Index has risen by 11.26% this year, while Kweichow Moutai's stock price has fallen by 10.39%, with both the company's stock price and liquor price declining during the year. Currently, Kweichow Moutai has chosen to support its stock price through share repurchases and increased dividends, which has been well received by investors. In terms of liquor prices, the company has taken several measures throughout the year to maintain the stability of Moutai liquor prices. However, Yang Delong, Chief Economist of Qianhai Kaiyuan, who has been closely following Moutai, suggested in an interview with the reporter that the major shareholder, Moutai Group, could consider using special increase-holding loans for holding more shares. Currently, Kweichow Moutai's dynamic dividend yield is about 3.29%, while the interest rate on special increase-holding loans should not exceed 2.25%. If Moutai Group chooses to increase holdings at this time, the dividends received annually could cover the financing interest. "If the major shareholder Moutai Group can use special increase-holding loans to increase holdings, it will greatly boost investors' confidence," Yang said. This article is reprinted from "Cailian News", written by Zhu Wanping; GMTEight Editor: Liu Jiayin.