World's most valuable distiller tends to underplay heady growth

[SHANGHAI] Kweichow Moutai Co, the world's most valuable distiller, has a forecast problem: while its eponymous liquor packs a punch, its financial guidance is less potent.

For the second consecutive year, the Chinese distiller on Tuesday will probably report revenue growth that surges past its own projection by more than three times, according to analyst estimates compiled by Bloomberg. And it looks likely to repeat the performance in 2018, as Moutai's forecast is significantly lower than analyst estimates.

"It is very unusual for a company's forecast to be so different from the final figure," said Juliette Liu, an analyst at Yuanta Securities Co.

"I've heard that some analysts have asked the company why the guidance is so off-the-mark, but did not get a satisfactory answer."

Moutai has benefited as its fiery grain liquor, traditionally the toast of choice among the country's elite, has found widespread popularity among China's middle class as they embrace a more affluent lifestyle. The company, which last year overtook Diageo as the world's top distiller by market value, has raised the price for its signature drink for the first time in five years and is looking to grow by expanding beyond its core liquor operations.

The company's revenue will jump 53 per cent to 59.5 billion yuan (S$12.4 billion) in 2017, according to estimates of 21 analysts compiled by Bloomberg. That would be far higher than the 15 per cent increase forecast by the company in April last year. Net income will probably surge 55 per cent to 25.8 billion yuan.

The liquor maker came under criticism in November for having a lofty market valuation. But that's not what has made it conservative in its guidance - the tendency has been there earlier. In 2007, Moutai posted 53 per cent growth in revenue after forecasting a 15 per cent increase, and in 2009 it reported an expansion that was twice the rate it projected, according to data compiled by Bloomberg.

The company didn't respond to requests for comment.

The pattern of actual results far exceeding the company's projections is set to repeat. In December, Moutai said revenue will climb 10 per cent in 2018. But since an 18 per cent increase in the price of its top-selling liquor took effect on Jan 1, analysts estimate revenue to grow about 27 per cent this year.

"The company's forecast is basically not of any use at this point," said Yuanta's Ms Liu.

BLOOMBERG