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Wuliangye Yibin Co Ltd Class A 000858

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Morningstar’s Analysis

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Wuliangye’s Q3 Growth Slowed but Cash Flow Robust, Maintaining FVE at CNY 188

Jennifer Song Senior Equity Analyst

Analyst Note

| Jennifer Song |

Wuliangye’s third-quarter revenue and net profit rose 10.6% and 11.8%, respectively, a significant slowdown from the 20% revenue growth and 26% net profit growth posted in the first half of 2021. This is disappointing, which reflects a higher base a year ago and a relatively weaker consumption environment amid the pandemic related impacts. In addition, we think the company pushed more supply to channels in the first half, which led to destocking in the third quarter. Nevertheless, cash flow remains robust, and cash received from sales increased 59.4% year over year, outpacing revenue growth. Recent channel feedback shows inventory fell to less than one month, and more than 90% of the full year target was completed. In addition, wholesale price is also stable at CNY 970-CNY 980 per bottle. Distributors remain confident in Wuliangye's demand outlook, and we estimate full year sale volume to rise 10% from a year ago.

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Company Profile

Business Description

Wuliangye Yibin is China's leading liquor producer by revenue and capacity. Founded in the 1950s, the company is based in Yibin, Sichuan province, in southwest China. Its high-quality products, extensive history, and brand strength are reflected in its lofty 73% gross margins and 70% return on invested capital over the past five years. Although the Chinese government's anti-extravagance measures will continue to weigh on the baijiu industry, we believe the company can maintain its premium position via its brand strength and product quality.

No.150, Minjiang West Road, Cuiping District
Yibin, 644007, China, People's Republic of
T +86 8313567000
Sector Consumer Defensive
Industry Beverages - Wineries & Distilleries
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 25,882