Kweichow Moutai Co (貴州茅台), which makes the fiery liquor long favored by China’s leaders and high-end consumers, yesterday lost almost US$10 billion in market value after its shares plunged as its disappointing earnings stoked pessimism over Chinese consumer spending.
Moutai shares, along with those of rival Wuliangye Yibin Co (五糧液), fell by the daily limit of 10 percent. Shares of Luzhou Laojiao Co (瀘州老窖), another liquor maker, tumbled as much as 8.6 percent.
The plunge in Chinese liquor stocks came amid a broad sell-off of consumer stocks on China’s A-share market, with a gauge tracking major consumer staple stocks tumbling as much as 8.7 percent.
Moutai, which posted its slowest quarterly profit growth in almost three years, was downgraded to “accumulate” from a “buy” by Zhongtai Securities (中泰證券), while its target price was lowered by CICC (中金公司) analysts.
The company’s 4 percent revenue increase in the third quarter was well below analyst estimates.
The world’s most valuable distiller and its rivals liquor makers are the latest stocks to be hit by China’s slowing economy as consumers of luxury goods show signs of pulling back on their spending.
The Chinese economy, which in the third quarter grew at its slowest pace since the aftermath of the global financial crisis in 2009, is facing worsening trade tensions and a slumping stock market.
“Slower economic growth in China could hurt Kweichow Moutai’s sales and earnings growth in the coming 12 months,” Bloomberg Intelligence analyst Shen Li said. “Weaker consumer sentiment associated with the property market and trade war may slow demand for luxury goods such as Moutai.”
Moutai’s revenue climbed to 19.72 billion yuan (US$2.84 billion) in the third quarter, the Guizhou-based company said in a statement on Sunday.
Net income rose almost 3 percent to 8.97 billion yuan.
Wuliangye also showed signs of a slowdown as it reported a 20 percent growth in net income, the slowest since the fourth quarter of 2016, and though Luzhou Laojiao reported its net income grew 46 percent in the third quarter from a year earlier, analysts estimate that to drop to 13 percent in the fourth quarter.
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