Moutai shares jump after first price increase in six years

KWEICHOW Moutai jumped the most in two years after the Chinese liquor giant said it would boost prices of its signature alcoholic drinks for the first time since 2017.

Shares rose as much as 9.8 per cent at the open after the state-owned distiller said late on Tuesday (Oct 31) it would increase factory-gate prices by an average 20 per cent for its signature baiju drink, the sorghum-based liquor of choice for banquets among government officials and businessmen in the country.

The decision to raise the ex-factory price of moutai to 969 yuan (S$181) a bottle came after repeated calls for such a move by investors, and almost matches the 18 per cent hike the company announced six years ago. Recommended retail prices for the liquor will remain the same, the company said, adding the move will have “some impact” on its earnings.

Shares were 6.3 per cent higher at 1,790.02 yuan as at 11.40 am Beijing time. Other distillers also rallied, with Wuliangye Yibin rising 3.8 per cent, and Luzhou Laojiao advancing 4 per cent. The broader CSI 300 Index climbed just 0.2 per cent.

The price increase will boost Kweichou Moutai’s earnings by 6.2 billion yuan a year and bolster net profits by 4.5 billion yuan, Zheshang Securities analysts including Yang Ji wrote in a research note. The decision addresses market concerns about the company’s profit outlook as retail prices for its moutai drinks had been falling recently, they wrote.

Moutai increased the proportion of its sales directly to consumers to 45 per cent in the third quarter, enhancing its capability to control prices. This has been helped by the spread of its i-Moutai app. BLOOMBERG