FY20 NP rose 13%, in line with consensus and our estimates. The Company targets a 10.5% YoY revenue growth to ~RMB108bn in FY21E, which is 5%/11% below consensus/our estimates. We assume the Company will postpone the ex-factory price increase to 1Q22E. Our TP is raised from RMB2,313.0 to RMB2,447.3, based on 53.7x average of FY21E and FY22E EPS. Given that wholesale price of Moutai trades at RMB2,460, the upside potential of ex-factory price is still large at >100%. Maintain Buy.
- Results highlights. Revenue rose 10% to RMB98.0bn, in line. Moutai revenue +12% to RMB84.8bn, driven by 13% ASP growth. The ASP growth was mainly led by increase of revenue mix in direct sales (from 9% of liquor revenue in FY19 to 14% in FY20), KA and e-commerce channels. Overall GPM widened 0.1ppt to 91.6%, attributable to 0.2ppt GPM expansion of Moutai revenue. EBIT margin expanded 1.3ppt to 67.8%, 1.4ppt above our estimates, due to 1.1ppt decrease of selling expenses ratio. In 4Q20, revenue increased 11% and NP rose 20%.
- Unlikely to raise ex-factory price in 2021. The 10.5% revenue growth target in FY21E implies Moutai ex-factory price would remain at RMB969. The production volume of Moutai base wine was 42,829 tonnes in FY17. Assuming 87% of base wine is converted into Moutai, 37,261 tonnes could be sold in FY21E. This implies a 9% Moutai volume growth at most in FY21E. Coupled with the improvement of direct sales mix and prices hikes of Moutai Zodiac (生肖酒), we think the Company could comfortably achieve its growth target.
- Upside potential of ex-factory price still large. News reported the Company raised ex-factory prices of Moutai Zodiac and series wine products by 53% and 10-40% in 2021. One of its 2021 goals is to strengthen management of distributors and maintain Moutai sales in order (维护茅台酒正常市场秩序). Given that wholesale price of Moutai trades at RMB2,460, the upside potential of ex-factory price is >100%.
- Maintain Buy. We lowered our FY21/22E NP estimates by 3%/6% as we assume the Company postpones the ex-factory price increase to 1Q22E. We lift TP from RMB2,313.0 to RMB2,447.3, at 53.7x average of FY21E and FY22E EPS, as we rolled forward our valuation basis. Catalysts: raise ex-factory price, better-than-expected revenue and margins. Risks: policy risk and food safety issues.
