Kweichow Moutai – A Share falls for a third consecutive day, a three-day fall of 0.9% 14 February 2020

NEWS BITES - BRIC

Kweichow Moutai Co., Ltd. - A Share (SS:600519), Shanghai's largest Food/beverage/tobacco company by market cap, has fallen CNY3.0 (0.3%) for a third consecutive day on Friday. This brought its three-day fall to CNY10.0 (0.9%), compared with the SSE Composite Index which rose 15.3 points (0.5%) in the three days for a relative price change of -1.4%. Cumulative volume in the 3 days was 0.7 times the average 3-day volume of 4.1 million shares. Kweichow Moutai - A Share's stock last traded at CNY1,088.0. There were 2,330,000 shares worth CNY2.5 billion (US$363.1 million) traded today.

Stock Summary

CurrencyChinese Yuan (CNY) 1 USD = 6.98 CNY
Today's close (CNY)1088.0
52-Week Range (CNY)703.7-1,241.6
SectorFood/Beverage/Tobacco sector
EPS Growth % (y.o.y)14.3
Shares Outstanding1,256,000,000
Market CapCNY1,366.5 billion (US$195.7 billion)

Highlights in today's Report:

SECTION 1 TODAY'S BEARISH SIGNALS

SECTION 2 TODAY'S BULLISH SIGNALS

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF CNY1,088.0):

SECTION 3 THE PAST WEEK

SECTION 4 ONGOING BULLISH PARAMETERS

SECTION 5 ONGOING BEARISH PARAMETERS

SECTION 6 SUMMARY FINANCIALS

SECTION 7 CORPORATE PROFILE

SECTION 1 KWEICHOW MOUTAI - A SHARE BEARISH SIGNALS

1.1 Overvaluation [compared with sector average]:

Earnings Yield

+ Earnings yield of 2.6% is below the 10-year bond yield of 2.87%.

Price/Earnings/Growth

+ Price/Earnings/Growth of 1.4 [1.3]. The price earnings ratio of 38.9 divided by annual growth in EPS (FY2018 vs FY2017) of 27.3% corresponds to a P/E/G of 1.4 times.

Dividend Yield

+ The relative yield of Kweichow Moutai - A Share, defined by its yield of 1.3%, divided by average yield of dividend yielding stocks in the SSE Composite Index of 2.5% is 53.0%. This suggests Kweichow Moutai - A Share stock is overvalued in dividend yield terms.

Price to Book

+ Price to Book of 12.5 [9.4].

MCap/Total Assets

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 8.5. Compared with the rest of the market the stock is overvalued and ranks in the bottom 2% of stocks by value of Q Ratio.

1.2 Overvaluation Indicators and rank of Kweichow Moutai - A Share in the Chinese market:

DescriptionValueRank In Market
P/E * P/NTA485.75In Bottom 1%
Price to Sales17.7In Bottom 1%
Price/Earnings38.9In Bottom Quartile
Price/Earnings/Growth1.4In Bottom Quartile

1.3 Downtrend:

Price/Moving Average Price and MACD:

+ The Moving Average Convergence Divergence (MACD) indicator of 12-day Exponential Moving Average (EMA) of 1,081.12 minus the 26-day EMA of 1,091.67 is negative suggesting a bearish signal.

+ The price to 50-day EMAP ratio is 1.0. In the past 200 days this ratio has been under 1.0 26 times suggesting downside. The 50-day EMAP has decreased to CNY1,110.54. A decrease is another bearish indicator.

Past Month:

+ The price decreased 1.8% in the past month. Volume traded for the month was about average.

Relative Strength (6 months):

+ In the Shanghai market of 1,450 stocks traded today, the stock has a 6-month relative strength of 63 which means it has outperformed 63% of the market.

Overbought/Bearish Signals:

+ The stock is overbought according to the Williams % R indicator of -19.3, suggesting the price is close to its 14-day high of CNY1,113.89.

SECTION 2 KWEICHOW MOUTAI - A SHARE BULLISH SIGNALS

2.1 Undervaluation Indicator and rank of Kweichow Moutai - A Share in the Chinese market:

DescriptionValueRank In Market
* EV/EBITDA27.0In Top Quartile

* Enterprise value of CNY1,383.9 billion is divided by Earnings before interest tax depreciation and amortization of CNY51.3 billion.

2.2 Uptrend:

Price/Moving Average Price:

+ The Price/MAP of 1.09 for 600519 is higher than the Price/MAP for the SSE Composite Index of 0.99.

+ The price to 200-day MAP ratio is 1.09, a bullish indicator. In the past 200 days this ratio has exceeded 1.09 187 times suggesting further upside. The 50-day MAP of CNY1,130.28 is higher than the 200-day MAP of CNY1,000.03, another bullish indicator.

Past Week:

+ In the past week, volume was 0.8 times average and the shares were up 1.1%.

Past Month:

+ In the past three months the stock has hit a new 52-week high twice.

2.3 High Price Performance Indicators and rank of Kweichow Moutai - A Share in the Shanghai market:

DescriptionValueRank In Market
Today's Trading TurnoverCNY2.5 billion (US$363.1 million)In Top 1%
MCapCNY1,366.5 billionIn Top 1%
Volatility %1.0In Top 3%
Price/MAP2001.09In Top Quartile

RECAP FROM PREVIOUS REPORTS (UPDATED AT THE LAST PRICE OF CNY1,088.0):

SECTION 3 THE PAST WEEK

3.1 Snapshot: Kweichow Moutai - A Share stock was up CNY12.0 or 1.1% in the past week. Volume in the week was 0.8 times average trading of 20.5 million shares. It outperformed the SSE Composite index in 3 out of 5 days. The price ranged between a low of 1,066.49 on Monday, Feb 10 and a high of 1,098.0 on Tuesday, Feb 11.

DayKweichow Moutai - A ShareClose price [CNY]Price change %Relative change %Comment
ThursdayFalls for a second consecutive day, a two-day fall of 0.6%1,091.0-0.60.1Overbought: close to 14-day high
WednesdayDecreases1,097.27-0.1-0.9Overbought: close to 14-day high
TuesdayHits a 22-day high on firm volume1,098.03.02.6Week-high of 1,098.0 Top Rise; VI*=1.2
MondayDecreases1,066.49-0.9-1.4Week-low of 1,066.49 Steepest Fall
FridayKeeps rising, up 7.2% in 4 days1,076.00.50.1Price rise on rising relative strength

[Volume Index (VI); 1 is average]

+ Kweichow Moutai Co., Ltd. - A Share is placed 780/1442 in BuySellSignals' ranking of Shanghai performers in the past week, a percentile ranking of 46.

3.2 Volatility:

+ Kweichow Moutai - A Share is at a discount of 12.4% to its 12-month high of CNY1,241.61 on November 19, 2019. It is also at a premium of 54.6% to the 12-month low of CNY703.68 on February 22.

SECTION 4 ONGOING BULLISH PARAMETERS

4.1 Performance:

+ Return on Equity 33.5% [20.3%].

+ Return on Assets 23.7% [13.0%].

+ Return on Capital Employed 43.3% [27.3%].

+ Net profit margin has averaged 47.1% in the last 3 years. This is considered superior and suggests a high margin of safety.

+ As per the Du Pont analysis, Return on Equity [ROE] is high at 33.5%; an improvement from 29.6% last year. ROE is computed as net profit margin of 49.0% times asset turnover [sales/assets] of 0.48 times leverage factor [total assets/shareholders' equity] of 1.4.

YOY Improvement in ROE and Profit Margin

Du Pont AnalysisROEProfit MarginAsset TurnoverEquity Multiplier
Current Year33.549.00.481.4
Previous Year29.647.50.451.5

4.2 Growth:

Quarterly Trend in Revenue, Net Profit and Net Profit Margin:

+ Net Profit margin is positive and has seen consecutive rises in recent quarters. [All figures in %]

Qtr-endedRevenue GrowthNet Profit GrowthNet Profit Margin
Sep 19 [Q3]--50.2
Jun 19 [Q2]-16.9-22.249.7

4.3 Low Debt Indicators:

+ The debt to equity ratio of 11.3% is under a safe benchmark figure of 50%. Moreover, it has improved in the past two years.

+ Total Liabilities/EBITDA of 0.9 is comfortably below the Joseph Piotroski benchmark of 5.

DescriptionValueRank In Market
Debt to Equity0.1In Top Quartile

4.4 High Performance Indicators and rank of Kweichow Moutai - A Share in the Chinese market:

DescriptionValueRank In Market
EBITDA Margin %66.4In Top 2%
Return on Assets [ROA] %23.7In Top 2%
Return on Equity [ROE] %33.5In Top 3%
Revenue Per EmployeeCNY2.9 million (US$416,196)In Top Quartile

4.5 Past 4 Quarters Sequential EPS growth averaged 4.7%:

Quarterly ReportEPS (CNY)Growth %
Q3/20198.014.3
Q2/20197.0-22.2
Q1/20199.012.5
Q4/20188.014.3

The most recent quarter (Q3/2019) showed a rise of 14.3% in sequential growth of Quarterly EPS. There have been three rises and one decline in the past 4 quarters. Average quarterly growth in the past 4 quarters was muted at 4.7%.

4.6 Past 5 years Annual EPS growth:

Annual ReportEPS (CNY)Growth %
201828.027.3
201722.069.2
201613.05.3
201512.340.6
201414.851.8

Average Annual Compounded rate of growth in EPS for the 5 years was impressive at 13.9%. There have been five rises in the past 5 years.

4.7 Moving Annual Return (Past 5 years)

Based on a dynamic start date of 5 years ago, the real rate of return has averaged 54.6%. The Moving Annual Return has consistently exceeded 6%.

600519Close (CNY)Dividends (CNY)Capital Gain %% YieldAnnual Return %
Feb 141,08814.5449.8251.8
1 Yr ago726.41151.66.6
2 Yrs ago691.786.79106.52108.6
3 Yrs ago334.946.1775.33.278.6
4 Yrs ago191.013.9824.82.627.4

Close 5 years ago CNY153.06

4.8 Increased VWAP

Past five years, 12 months ended Feb 14 (CNY)

YearHigh PriceVWAPLow Price
20201241.61982.57703.68
2019780.7659.05501.59
2018776.38543.38330.71
2017344.37276.04187.01
2016242.28196.95151.31

In the past five years Volume Weighted Average Price (VWAP) has increased by 398.9% to CNY982.57. Based on a dynamic start date of five years ago, there has been no decline in VWAP over the last 5 years.

4.9 Increased Average Daily Turnover

Past five years, 12 months ended Feb 14 (CNY billion)

YearAverage Daily Turnover
20203.9
20192.6
20182.2
20170.81
20161.0

In the past five years, average daily share turnover has increased 269.2% to CNY3.9 billion (US$555.1 million). This suggests increased liquidity.

4.10 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 67.4% (or a turnover period of 1 year 5 months). The average length of ownership of the stock is 2.1 times the average holding period of 8 months for stocks in the SSE Composite Index suggests a larger number of core investors, making a long-term investment safer.

SECTION 5 ONGOING BEARISH PARAMETERS

5.1 Low Growth and Performance Indicator and rank of Kweichow Moutai - A Share in the Chinese market:

DescriptionValueRank In Market
EPS Growth %27.3In Bottom Quartile

5.2 Declining ADVT past five years

Avg. Daily Volume Traded 12 months ended Feb 14, million shares

YearADVT
20204.1
20194.2
20184.1
20173.0
20165.3

In the past five years, Average Daily Volume of Trading (ADVT) has decreased 22.2% to 4.1 million shares.

SECTION 6 KWEICHOW MOUTAI - A SHARE SUMMARY FINANCIALS

6.1 Dividend History

Trailing 12 months dividend for the 12 months ended February 14 has improved from CNY3.98 in 2016 to CNY14.54 in 2020; there were no declines in the past 5 years. Dividends were up 32.2% for the 12 months ended February 14 from CNY11.0 in 2019 to CNY14.54 in 2020.

6.2 Financials Summary

Year endedDec 2018Dec 2017Dec 2016
Sales (USD B)11.18.75.7
Pretax (USD B)7.35.53.4
Net (USD B)53.92.4
EPS (CNY)282213

+ Net profit was up 30% from US$3.9 billion in 2017 to US$5 billion in 2018.

+ Earnings Per Share (EPS) was up 27.3% from CNY22.0 to CNY28.0.

6.3 Quarterly Report: Key Parameters

Quarterly Report Analysis Q3 2019: Kweichow Moutai - A Share reports Net Profit of CNY10.5b ($US1.5b)

Kweichow Moutai - A Share (SS:600519) announced net profit for the quarter-ended 30 September 2019 of CNY10.5b ($US1.5b). Earnings per share (EPS) were up 14.3% sequentially from CNY7.0 ($US1.02) in Q2/2019 to CNY8.0 ($US1.12) in Q3/2019.

Quarter-ended30 Sep [Q3/2019]30 Jun [Q2/2019]31 Mar [Q1/2019]
EPS, CNY8.07.09.0
Sequential growth in EPS %14.29-22.2212.5
Revenue, CNY billion22.318.722.5
Revenue, $US billion3.12.63.2
Sequential growth in Revenue %--16.85-
Net Profit, CNY billion10.58.711.2
Net Profit, $US billion1.51.21.6
Sequential growth in Net Profit %--22.21-

Compared with the previous corresponding period [PCP; Q3/2018], year-over-year [y.o.y.] EPS was up 14.3%, Revenue was up 13.3% and Net Profit was up 17.1%.

Quarter-ended30 Sep [Q3/2019]30 Sep [Q3/2018]
EPS, CNY8.07.0
PCP growth in EPS %14.29-
Revenue, CNY billion22.319.7
Revenue, $US billion3.12.8
PCP growth in Revenue %13.283.81
Net Profit, CNY billion10.59.0
Net Profit, $US billion1.51.3
PCP growth in Net Profit %17.112.71

Major changes compared with previous corresponding period [Year-on-Year]:

Favourable Changes:

- Net profit up 17.1% from CNY9.0b ($US1.3b) to CNY10.5b ($US1.5b)

- Total revenue up 13.3% from CNY19.7b ($US2.9b) to CNY22.3b ($US3.1b)

- EBIT to Sales up from 65.2% to 66.8%

- Profit before tax to Sales up from 65.2% to 66.8%

- Profit after tax to Sales up from 45.5% to 47%

Note:

- Tax expenses to Sales up from 16.3% to 16.6%

Currency Conversion (September 30, 2019): $US1 = CNY7.13

Currency Conversion (September 30, 2018): $US1 = CNY6.87

6.4 Annual Report: Key Parameters

FY2018 Annual Report: Kweichow Moutai - A Share EPS Growth slows to 27.3%

Kweichow Moutai - A Share (SS:600519), announced EPS of CNY28.0 ($US4.07) for the year-ended 31 December 2018, up 27.3% from CNY22.0 ($US3.38) in the previous year-ended 31 December 2017. EPS growth from the year-ended 31 December 2016 to the year-ended 31 December 2017 was 69.2%.

Period-endedEPS in CNYFx USD1=CNYEPS in $USEPS growth %
31 December 201828.06.884.0727.3
31 December 201722.06.523.3869.2

Major changes compared with previous year:

Favourable Changes:

- Net profit up 30% from CNY27.1b ($US4.2b) to CNY35.2b ($US5.1b)

- Sales revenue up 26.4% from CNY61.1b ($US9.4b) to CNY77.2b ($US11.2b)

- EPS up 27.3% from CNY22.0 ($US3.38) to CNY28.0 ($US4.07)

- EBIT Margin up from 63.4% to 65.8%

- EBIT to total assets up from 28.8% to 31.8%

- Profit before tax to Sales up from 63.4% to 65.8%

- Sales and marketing expenses to Sales down from 15.2% to 13.2%

- Current ratio up 11.7% from 2.9 to 3.2

- Working capital to total assets up from 54.7% to 59.7%

- Total current assets to Total Assets up from 83.4% to 86.2%

- Total Liabilities to EBITDA of 0.9 compares favourably with the Joseph Piotroski benchmark of <5. This ratio has improved by 16.4% from the previous year's ratio of 1.1.

- Net tangible assets per share up 24.3% from CNY70.05 ($US10.7) to CNY87.04 ($US12.7)

Unfavourable Changes:

- Fixed Assets to Total Assets down from 12.8% to 10.8%

Note:

- Total revenue to total assets steady at 0.5

- Tax expenses to Sales up from 15.9% to 16.8%

- Total liabilities to Total assets steady at 0.3

- Current Inventory to Total Assets down from 16.4% to 14.7%

- Intangibles to Total Assets down from 2.6% to 2.2%

Annual Report [Year-on-year comparison: 2018 vs 2017]

Company Name : Kweichow Moutai Co., Ltd. - A Share (600519)
December 312018201720182017Change
DescriptionCNY mCNY m$US m$US m(%)
Sales Revenue77,199.461,062.811,222.59,369.3Up 26.4
EBITDA51,253.239,162.37,450.76,009Up 30.9
EBIT50,827.638,740.17,388.85,944.2Up 31.2
Pre-Tax Profit/(Loss)50,827.638,740.17,388.85,944.2Up 31.2
Profit/(Loss) after Tax35,203.627,079.45,117.64,155Up 30
Working Capital95,423.673,674.313,871.711,304.4Up 29.5
Current Assets137,861.8112,249.220,04117,223.3Up 22.8
Current Liabilities42,438.238,574.96,169.25,918.9Up 10
Shareholders' Funds112,838.691,451.516,403.314,032.1Up 23.4
Total Liabilities47,008.143,158.66,833.66,622.2Up 8.9
Total Assets159,846.7134,610.123,236.920,654.3Up 18.7
Current Debt12,753.310,462.61,8541,605.4Up 21.9
Total Debt12,753.310,462.61,8541,605.4Up 21.9
Operating Cash Flow41,385.222,1536,016.23,399.1Up 86.8
Net Assets112,838.691,451.516,403.314,032.1Up 23.4
Net Tangible Assets109,339.487,992.915,894.713,501.5Up 24.3

Year-on-year comparison of Per Share figures

December 312018201720182017Change (%)
SalesCNY61.5CNY48.6$US8.9$US7.5Up 26.4
EBITCNY40.5CNY30.8$US5.9$US4.7Up 31.2
EBITDACNY40.8CNY31.2$US5.9$US4.8Up 30.9
CashCNY89.2CNY69.9$US13$US10.7Up 27.5
Working CapitalCNY76CNY58.6$US11$US9Up 29.5
Shareholders' FundsCNY89.8CNY72.8$US13.1$US11.2Up 23.4
Total LiabilitiesCNY37.4CNY34.4$US5.4$US5.3Up 8.9
Total AssetsCNY127.2CNY107.2$US18.5$US16.4Up 18.7
Current Debt1,015.2fen832.9 fenUS147.6cUS127.8cUp 21.9
Total Debt1,015.2fen832.9 fenUS147.6cUS127.8cUp 21.9
Net Tangible AssetsCNY87CNY70$US12.7$US10.7Up 24.3
EPS FinalCNY28CNY22$US4.1$US3.4Up 27.3
    EPS Dilution Factor *0.91    

* EPS Dilution Factor = EPS change / Net Profit change

Year-on-year comparison of Performance Ratios

December 3120182017Change (%)
Return on Equity (%)33.529.6Up 13.2
Return on Assets (%)23.721.5Up 10.2
Total debt to net tangible assets (%)11.711.9Down 1.7
Total Liabilities to EBITDA0.91.1Down 16.4
Debt/Equity (Steady % from 0.11 to 0.11)0.10.1Steady
Total Liabilities/Total Assets (Down 9.4% from 0.32 to 0.29)0.30.3Down 9.4
Current Ratio3.22.9Up 11.7
Common Size Ratios by Assets %
Total current assets to Total Assets 86.2 83.4 Up 3.4
Current Inventory to Total Assets 14.7 16.4 Down 10.3
Total non-current assets to Total Assets 13.8 nana
Fixed Assets to Total Assets 10.8 12.8 Down 15.8
Intangibles to Total Assets 2.2 2.6 Down 14.4
Common Size Ratios by Sales %
Profit before tax to Sales 65.8 63.4 Up 3.7
Cost of Goods Sold to Sales 19.8 --
Tax expenses to Sales 16.8 15.9 Up 5.4
Sales and marketing expenses to Sales 13.2 15.2 Down 13.3

Currency Conversion (December 31, 2018): $US1 = CNY6.88

Currency Conversion (December 31, 2017): $US1 = CNY6.52

Five-year record of growth and performance:

In the last 5 years Total Revenue averaged CNY48.8B ($US7.1B), EBITDA averaged CNY31.8B ($US4.6B) and Net Profit averaged CNY23.5B ($US3.4B). Compound Annual Growth Rate (CAGR) averaged 20.0% for Total Revenue, 18.4% for Net Profit and 18.8% for EBITDA.

DescriptionAnnual (CNY B)Annual ($US B)5-year Avg (CNY B)5-year Avg ($US B)5-year CAGR %
Total Revenue77.211.248.87.120
EBITDA51.37.531.84.618.8
Operating Profit50.87.431.54.618.9
Net Profit35.25.123.53.418.4

Five-year record of EBITDA, Operating Profit, Net Profit, ROE, ROA and ROCE

In 2018 Net Profit Margin of 49.0% was above its 5-year Avg of 48.2% (All Figures in %)

Description20185-year Avg
EBITDA Margin66.465.3
Operating Profit Margin65.864.5
Net Profit Margin4948.2
Return on Equity33.527.8
Return on Assets23.721
Return on Capital Employed43.337.6

SECTION 7 CORPORATE PROFILE

7.1 Activities

Kweichow Moutai is principally engaged in the manufacture and sale of distilled spirits, under the brand name of Moutai. Based in Moutai Town, Renhuai City, Guizhou Province, the People's Republic of China (PRC), the Company also manufactures beverages, food and packaging materials. Its product portfolio is comprised of light distilled spirits and heavy distilled spirits, under the brand name of Moutai.

7.2 Issued Capital and MCap

Based on 1,256,000,000 issued shares the market capitalisation is CNY1,366.5 billion (US$195.7 billion).

7.3 Vanguard Total World Stock ETF 7670:

The stock was one of 7670 global stocks selected by Vanguard Total World Stock ETF (VT). As at Nov 30, 2019, the Vanguard Total World Stock ETF held 22,746 shares worth $US3,854,062 or 0.02% by value of the ETF's portfolio [Ranked 812 out of 7670 by value and 1 out of 162 for Shanghai].

COMPANY IDENTIFIERS

Contact: 86-852-2386002

Physical Address: Maotai Town Renhuai, Guizhou, 564501 China

State/Province/Country: GUZ, China

Country of Incorporation: China

Exchange: Shanghai Stock Exchange (SSE)

Economic Sector: Consumer Non-Cyclicals

Business Sector: Food & Beverages

ISIN: CNE0000018R8

SS:600519; SHA:600519; CH:600519; 600519.SS

PermID: 4295864072

RIC: 600519.SS

Kweichow Moutai Co Ltd, Kweichow Moutai Co, Ltd

Source: www.BuySellSignals.com