Wuliangye Yibin Stock at a Glance
- Fair Value Estimate: CNY 196.00
- Morningstar Rating: 4 stars
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Wide
Wuliangye Yibin Earnings Update
We maintain our fair value estimate for wide-moat Wuliangye (000858) at CNY 196 per share, despite the company’s weaker-than-expected second-quarter results, with sales growth decelerating to 5.1% year over year from 13.0% in the prior quarter, weaker than the 20.4% sales growth at peer Kweichow Moutai (600519). We think this reveals some headwinds from the sluggish macro conditions. However, we think Wuliangye has proactively optimized its product strategy and channel structure, allowing it to be better positioned for the channel restocking process ahead of the expected pick-up in demand for October Golden Week. We think the shares are slightly undervalued as of Aug. 28, and the recent share price weakness is a buying opportunity.
Our channel check with distributors indicates demand for Wuliangye remains resilient, and the firm has completed more than 75% of its full-year sales target, with a healthy inventory level of one month. We expect Wuliangye to restore its growth momentum in the second half and only tweak our earnings forecast minimally. We expect a full-year 2023 net profit of CNY 30.6 billion, representing 14.6% year-over-year growth, and we expect the company’s net profit to grow at a five-year CAGR of 14.0% through 2022-27.
