Moutai Panics! Spends ¥6B on Share Buyback!

Since 2024, the stock price of Kweichow Moutai, the leader in the Chinese liquor industry, has been heading south.

Since May, the stock price has successively broken through the five major integer levels of 1700, 1600, 1500, 1400, and 1300.

On September 19th, it reached its lowest point at 1245.83, only about 10 yuan away from the low point of 1235 on October 31, 2022.

Based on the current trend, it is almost certain to break through the 1200 yuan level.

This year, the stock price of Moutai has accumulated a decline of nearly 27%, and if calculated from the historical high point, the stock price has been halved.

Moutai has taken action to counter the continuous decline in stock prices and to stabilize market confidence.

On the evening of September 20th, Kweichow Moutai announced that the company plans to repurchase shares worth between 3 billion and 6 billion yuan to cancel and reduce the registered capital, with the repurchase price not exceeding 1795.78 yuan per share (inclusive).

It is worth noting that this is the first time Kweichow Moutai has issued a share repurchase plan since its listing, and its proposed maximum repurchase amount ranks first among A-share listed companies from the beginning of this year to now.

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Based on the repurchase limit, a repurchase of 6 billion yuan is indeed a big move, but compared to the company's market value of 1.58 trillion yuan, and the cash on hand of 56.8 billion yuan, cash flow of 36.6 billion yuan, and undistributed profits of 173.7 billion yuan, the repurchase amount can be said to be a drop in the bucket.

It may boost the stock price in the short term, but in the long run, its impact on the stock price is not very significant.

Compared to the hundreds of billions of dollars in share repurchases in the US stock market, this is a minor issue.

For example, on September 17th, Microsoft announced a stock repurchase plan of up to 60 billion US dollars, and there is no deadline for the repurchase plan.

In my opinion, such high-quality companies need to be bold in repurchasing hundreds of billions of dollars to fully boost market confidence.

Not only is Moutai in a hurry, but the entire liquor industry is actually very anxious.

This year, liquor stocks have been falling continuously.

Among the 20 liquor companies listed, 19 have seen a decline of more than 20%, with the least decline being Kouzi Jiao, which fell by 18%.

The largest decline was Rock Shares, with a decline of 64%, and Shede Winery also fell by 56%.

The declines for Jiugui Liquor, Luzhou Laojiao, Golden Seed Liquor, Shuijingfang, and Huangtai Winery all exceeded 40%, which is a terrible sight.

The China Liquor Index also followed a sharp decline, with a cumulative decline of 32% since the beginning of the year, and a cumulative decline of 53.73% since the historical high point on January 18, 2021, with the largest decline nearing 62%.

It is worth mentioning that in the face of the continuous decline of liquor stocks, in addition to Kweichow Moutai just announcing the repurchase of shares, Yanghe Shares, Shede Winery, Jinhui Liquor, and Shuijingfang have also repurchased shares.

The main reason for the continuous decline in liquor stocks is the weakness on the consumer side, and under the background of high inventory, the growth rate of the liquor industry's performance has obviously slowed down.

As of the end of the second quarter, the inventory of the 20 liquor companies listed was 150.6 billion yuan, a year-on-year increase of 10% compared to the end of the second quarter of 2023.

Currently, consumer stocks, including liquor stocks, are facing a weak consumer side.

Data shows that in August 2024, the total retail sales of consumer goods were 387.26 billion yuan, a year-on-year increase of 2.1%.

From January to August, the total retail sales of consumer goods were 3124.52 billion yuan, a year-on-year increase of 3.4%.

These data indicate that the weakness on the consumer side is still difficult to change in the short term, and the rise of consumer stocks still needs to wait for the recovery of the consumer market.

At the same time, the liquor leader Kweichow Moutai is expected to break through the 1000 yuan level to gain real expectations.

Therefore, under the current conditions, it is necessary to be cautious when bottom-fishing in liquor stocks.

The above views do not constitute any investment advice, and the stock market has risks, so investment should be cautious.