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after announcing the high cash dividend plan,kweichow moutaiplans to repurchase shares to enhance investor confidence

text｜zhang jianfeng

editor｜yang xiuhong

at a time when its stock price is sluggish, the liquor leader kweichow moutai (600519.sh) has launched a plan to repurchase shares and cancel them.

on the evening of september 20, kweichow moutai announced that it plans to use its own funds of 3 billion to 6 billion yuan to repurchase the company's shares through centralized bidding transactions. the upper limit of the company's repurchase price is 1,795.78 yuan per share (inclusive), and the repurchased shares will be used to cancel and reduce the company's registered capital.

ouyang qianli, a researcher in the wine industry, told caixin that the upper limit of kweichow moutai's repurchase price is much higher than the company's stock closing price of 1,263.92 yuan per share on september 20, providing a relatively clear value benchmark. while injecting confidence into the capital market, it also sets a new example for other industries and companies.

cai xuefei, general manager of zhiqu consulting and wine analyst, told caixin that taking into account moutai's successive dividends in recent years, this repurchase is a financial reflection of moutai's responsibility to shareholders. it is also a positive measure for moutai to stabilize market sentiment, safeguard the interests of channel dealers, and activate market consumption during the adjustment cycle.

since 2024, many listed companies have repurchased shares. wind data shows that from the beginning of 2024 to september 20, more than 1,900 a-share companies repurchased shares, involving a total amount of about 129.6 billion yuan. among them, there are 11 companies with a repurchase amount of more than 1 billion yuan.

behind the share repurchase, affected by factors such as the fluctuation of moutai's wholesale price, the downgrade of liquor companies' ratings by institutions and the sluggish performance of the mid-autumn festival liquor market, kweichow moutai's share price has continued to decline since may 2024.

although kweichow moutai announced a high-proportion cash dividend return plan for 2024-2026 in august 2024, the company's stock price still fell to 1,245.83 yuan per share during the trading session on september 19, hitting a new low since june 2020. compared with the intraday high of 1,874.1 yuan per share on july 31, 2023, it fell 34%, and the market value evaporated by about 789.1 billion yuan. on september 20, the company's stock closed at 1,263.92 yuan per share, with a market value of 1.59 trillion yuan.

despite the sluggish stock price, kweichow moutai's performance is still growing steadily. in the first half of 2024, the company's operating income and net profit attributable to shareholders were 81.9 billion yuan and 41.7 billion yuan, respectively, with year-on-year growth rates of more than 15%.

regarding whether the 2024 performance growth target can be achieved, zhang deqin, chairman of kweichow moutai, stated at the 2024 semi-annual performance briefing that the board of directors and the production and operation team will perform their duties diligently and ensure that the annual 15% operating revenue growth target is achieved as scheduled.

buybacks boost confidence

according to the announcement, the upper limit of kweichow moutai's proposed repurchase price this time is 1,795.78 yuan per share (inclusive). based on this calculation, the expected number of shares to be repurchased is approximately 1.6706 million shares to 3.3412 million shares, accounting for approximately 0.13% to 0.27% of the total share capital.

regarding the purpose of share repurchase, kweichow moutai said that in order to safeguard the interests of the company and the majority of investors and enhance investment confidence, on the premise of ensuring that the company's normal operations and long-term development are not affected, in accordance with relevant regulations, the company plans to implement a share repurchase plan with its own funds. the repurchased shares will be used to cancel and reduce the company's registered capital.

the implementation period of the above-mentioned share repurchase is within 12 months from the date on which the kweichow moutai shareholders' meeting deliberates and approves the repurchase plan, and the repurchase funds will come from the company's own funds.

what impact will this repurchase have on kweichow moutai’s operations?

as of june 30, 2024, kweichow moutai’s total assets were rmb 279.207 billion, its net assets attributable to shareholders of listed companies were rmb 218.576 billion, and its cash and cash equivalents were rmb 145.267 billion.

based on the calculation that the upper limit of rmb 6 billion for share repurchase has been fully used, the repurchase funds will account for approximately 2.75% of the company's net assets attributable to shareholders of listed companies as of june 30, 2024, and 4.13% of cash and cash equivalents.

kweichow moutai said that after the implementation of the above-mentioned repurchase plan, it will not have a significant impact on the company's daily operations, finances, future development, etc.

at the kweichow moutai 2024 semi-annual performance briefing on september 9, an investor asked whether the company should repurchase and cancel shares to reduce its share capital and increase the gold content per share.

in this regard, zhang deqin said that in combination with the current stock market situation and the company's actual situation, the company has conducted a systematic study on different market value management measures. if there are relevant plans in the future, the company will strictly implement the corresponding decision-making and review procedures and make announcements in accordance with relevant regulations.

ouyang qianli told caixin that kweichow moutai's first implementation of a cancellation-style repurchase in 23 years since its listing can be seen as a response to the new "nine national policies" and a reflection of its adoption of suggestions from small and medium-sized investors. it implements market value management tools through dividends, repurchases and other means, allowing investors to have a greater sense of participation.

in cai xuefei's view, with the implementation of relevant reform policies including repurchase and dividends, favorable conditions have been created for enhancing the brand value of moutai and stabilizing product prices. this has a weather vane significance for the chinese liquor consumption market, which is currently in a deep adjustment cycle.

on the evening of august 8, 2024, kweichow moutai released its interim report and announced its cash dividend return plan for 2024-2026. the total amount of cash dividends distributed by the company each year shall not be less than 75% of the net profit attributable to shareholders of the listed company in that year. the annual cash dividends will be implemented twice (annual and mid-term dividends). this measure was interpreted by the market as a major measure for the company to manage its market value.

at that time, the market gave positive comments on the announcement of kweichow moutai's high cash dividend plan.

yang delun, chief economist of qianhai kaiyuan fund, told caixin that kweichow moutai's increase in dividends will help enhance investors' sense of gain and will have a positive effect on maintaining and enhancing moutai's market value.

it is worth noting that after the company's stock price fell to a staged low of 1,255.53 yuan per share during intraday trading on october 31, 2022, kweichow moutai launched its first special dividend plan to reward shareholders in november 2022, and also announced a plan for the controlling shareholder, moutai group, to increase its holdings. at that time, moutai group advocated that other shareholders use the funds from the above dividends to voluntarily increase their holdings of the company's shares.

after the above news was announced, kweichow moutai's stock price entered an upward channel. on january 16, 2023, the company's stock price exceeded 1,800 yuan per share during the trading session.

the stock price hit a four-year low

behind kweichow moutai's first repurchase after its listing is the company's stock price hitting a new low in nearly four years.

in the four trading days from september 12 to 19, 2024, kweichow moutai's stock price continued to decline and fell below 1,300 yuan per share. the company's stock price fell by more than 2% in the first three trading days.during this period, on september 19, the company's stock price fell to an intraday low of 1,245.83 yuan per share, hitting a new low since june 2020.

poor forecasts for liquor sales during the mid-autumn festival and sluggish liquor sales data during the period triggered a further decline in the share price of kweichow moutai.

orient securitiesa research report released on september 11 stated that the mid-autumn festival and national day peak season is approaching, and wine companies are generally entering the shipping time point. considering the weak consumer environment, it is expected that wine companies will be cautious in their investment and distributors will be generally enthusiastic about collecting payments.

the sales data during the mid-autumn festival confirmed the market's concerns. continuous differentiation and sluggish sales are the summary of the liquor market performance during the mid-autumn festival by many brokerages.

according to feedback from channels in various regions, the atmosphere of the 2024 mid-autumn festival liquor peak season is weaker than in previous years, and sales have declined year-on-year. anhui, sichuan and other places have reported that the decline in sales ranged from 10% to 30%. channel inventory has increased slightly by 0.5 months to 1 month month-on-month from the end of the second quarter, and terminal inventory is still acceptable.

existhuachuang securitiesit seems that the weakening external demand and the decline in consumption frequency and quality are the main reasons for the decline in sales during the mid-autumn festival. "factors such as stricter industry supervision and typhoon weather in east china also have a certain impact."

looking at the price range, sales of high-end brands priced above rmb 1,000 fell by 5%-10%, the mid-to-high-end price range fell by more than double digits, and sales of mass-market brands priced between rmb 100 and rmb 300 were relatively good.

however, many institutions remain optimistic about the future performance of the liquor market.

in the view of huachuang securities, the two peak seasons of mid-autumn festival and national day in 2024 will be relatively long, with a two-week interval, which will provide a certain window period for the increase in the frequency of returning home and banquets. the terminals are expected to have certain replenishments before national day, and the channels may add some repayments near the end of the fiscal year to ensure full-year profits, and the inventory may be digested to a certain extent.

in fact, since may 2024, affected by factors such as fluctuations in the wholesale price of moutai liquor, the share price of kweichow moutai has continued to decline.

in june 2024, affected by factors such as the lower price after 10 billion yuan in subsidies from e-commerce companies, the price of feitian moutai fluctuated, and some scalpers suspended delivery.

today's wine prices on a third-party data platform show that the wholesale reference price of 53-degree 500ml 24-year feitian moutai (loose) (excluding necessary costs such as taxes/logistics/labor, the same below) has dropped from 2,470 yuan/bottle on june 9, 2024 to 2,230 yuan/bottle on june 14.

affected by this, in late june, the company's closing price hovered around 1,500 yuan per share, down more than 10% from this year's highest stock price of 1,741.72 yuan per share during trading on may 7.

july 26,ubsthe report downgraded the ratings of listed liquor companies such as kweichow moutai. it also predicted that based on factors such as potential inventory, the wholesale price of moutai may fall by 50% from the current price by 2025.

affected by the above news, kweichow moutai's stock price continued to fall. on july 30, the company's stock price fell to 1,361.3 yuan per share, hitting a temporary low since 2023.

subsequently, peng yanyan, head of greater china consumer products industry at ubs, told the media that the continued expansion of production capacity of leading liquor companies and population decline may be the structural resistance facing overall liquor consumption, coupled with social inventory factors, that is, part of the demand has been hoarded as investment in the past decade.

it further stated that the wholesale prices of some liquors mentioned in the report may fall by 17% to 50% from the current level, which is an assumption under the most pessimistic scenario, not the baseline scenario.

cai xuefei told caixin that although the entire brewing industry still faces risks such as high inventory, price inversion and sluggish demand in 2024, judging from recent trends, the high-end wine consumption market is currently showing a trend of stabilizing and recovering, and the industry is in the stage of bottoming out prices. it is expected that the market will enter a dynamic and stable stage after the spring festival next year.

continued growth in performance

in contrast to the continued sluggish stock price, kweichow moutai's performance continues to maintain steady growth.

in the first half of 2024, the company's operating income increased by 17.76% year-on-year to 81.9 billion yuan, and its net profit attributable to shareholders increased by 15.88% year-on-year to 41.7 billion yuan. compared with the first quarter, the company's operating income growth rate declined slightly, while the net profit growth rate increased slightly.

regarding the company's first-half performance, many institutions said it exceeded expectations.

ciccit said that kweichow moutai exceeded expectations in the second quarter, mainly because the revenue growth of its series of wines was higher than expected. in terms of products, in the first half of 2024, the company's moutai liquor revenue increased by 15.67% year-on-year to 68.567 billion yuan, and the series of wine revenue increased by 30.5% year-on-year to 13.147 billion yuan.

the high growth of series wines is expected to be driven by moutai 1935. some securities firms pointed out that the release of series wines accelerated significantly in the second quarter. earlier in early july, it was disclosed that moutai 1935 had exceeded the first half of the year's task indicators and suspended its release.

the changes in kweichow moutai’s sales channels have also attracted attention.in the first half of 2024, the company's wholesale agency and direct sales revenues were 47.986 billion yuan and 33.728 billion yuan, respectively, up 26.5% and 7.35% year-on-year. for the first time in the past five years, the year-on-year growth rate of the company's wholesale agency channel revenue has exceeded the growth rate of direct sales channel revenue.

in this regard, jiang yan, deputy general manager, financial director and secretary of the board of directors of kweichow moutai, said that the company's wholesale channel revenue increased significantly year-on-year in the first half of the year, mainly because the ex-factory price of 53-degree kweichow moutai (feitian and five stars) increased, which increased the proportion of wholesale channel revenue. the company's wholesale channel sales policy has not been adjusted.

from november 1, 2023, kweichow moutai will raise the ex-factory price of 53% kweichow moutai (feitian, five star), with an average increase of about 20%. the original ex-factory price of feitian 53% 500ml kweichow moutai was 969 yuan/bottle. according to the 20% increase, the adjusted ex-factory price is about 1,169 yuan/bottle.

regarding the issue of wholesale prices of moutai liquor in the market that concerns the market, zhang deqin said at the kweichow moutai 2024 semi-annual performance briefing that moutai attaches great importance to market conditions. the company has conducted in-depth market research in various provinces and regions, held market work meetings in various provinces and regions, and held in-depth discussions and exchanges with representatives of distributors, e-commerce, group purchasing, provincial and regional self-operated and other channels. it continues to improve the strategic and tactical system that is both systematic and coordinated, and the overall market situation is relatively stable.

the market remains optimistic about the company's subsequent performance. achieving a year-on-year growth of about 15% in total operating revenue and completing fixed asset investment of 6.179 billion yuan are the main goals of kweichow moutai in 2024.

existcitic construction investmentit seems that the company will be able to further market-oriented reforms, continue to strengthen its brand foundation, and drive the company's business to continue to improve. "in terms of products, feitian prices have gradually stabilized, non-standard products such as solar term wines continue to release moutai's investment value, and moutai 1935 has completed its upgrade and exceeded the 10 billion mark. in terms of channels, innovations such as imoutai, xunfeng platform, and three-generation specialty stores have made outstanding contributions to the optimization of the company's channel structure."