Kweichow Moutai: After enduring the 'pain period,' the stock king remains a hero!

$Moutai(600519.SH) On the evening of August 12th Beijing time, Kweichow Moutai (600519.SH) released its Q2 2025 earnings. In the context of the off-season, "alcohol ban," and persistently weak demand, Moutai's second-quarter performance was overall disappointing, slightly below market expectations.

1. Continued slowdown in performance: In 2Q25, Moutai achieved revenue of 39.65 billion yuan, a year-on-year increase of 7.3%, slightly below the market consensus (market expectation was 40.1 billion yuan). The core issue remains the significant decline in series wines. From the pace perspective, the overall revenue for the first half of the year grew by 9.2% year-on-year. If the same pace is maintained in the second half, achieving the annual target of 9% should not be difficult.

In terms of profitability, Moutai achieved a net profit attributable to the parent company of 18.56 billion yuan in 2Q25, a year-on-year increase of 5.2%, slower than the revenue growth rate, mainly due to increased market promotion expenses.

2. Non-standard products remain the "pillar": In 2Q25, Moutai liquor achieved revenue of 32 billion yuan, a year-on-year increase of 11%. Considering the increased efforts to control supply and stabilize prices for Feitian, Dolphin Research speculates that the growth of Moutai liquor is more attributed to the increased contribution from non-standard liquor offerings. Based on channel research information, Moutai has significantly increased the proportion of kilogram-sized Moutai, not only indirectly raising the ex-factory price (converted to 500ml, nearly 20% higher than the regular Feitian price) but also promoting terminal consumption (larger bottles are more suitable for group drinking scenarios such as banquets and gatherings, not suitable for gifting & hoarding).

3. Severe decline in series wines: In 2Q25, series wines achieved revenue of 6.7 billion yuan, a year-on-year decline of 6.6%. Based on research information, although Moutai 1935 has gained strong momentum in the 700-800 yuan price range by deeply cultivating the wedding market and cooperating with specialized and innovative enterprises, other products including Prince and Welcome wines have almost all declined due to weak demand and high channel inventory.

4. Increase in direct sales channel proportion: From the channel structure perspective, in 2Q25, Moutai's direct sales channel accounted for 43.3% of sales, an increase of 3.4 percentage points year-on-year, mainly due to increased non-standard Moutai offerings in iMoutai and group purchase channels, while the distributor channel only grew by 1.5% year-on-year due to the severe decline in series wines.

5. Increase in sales expense ratio, slight decline in profit margin: In terms of gross margin, although the proportion of Moutai liquor increased compared to the same period last year, Dolphin Research speculates that due to price promotions for some series wines, the overall gross margin slightly declined by 0.3 percentage points to 90.6%. In terms of expense ratio, due to increased market promotion expenses for non-standard and series wines, the sales expense ratio increased by 0.5 percentage points to 4.5%, while the management expense ratio remained stable. The final net profit margin slightly declined by 0.9 percentage points to 46.8%.

6. Overview of core financial information

Dolphin Research's overall view:

Overall, since liquor companies can delay the impact on performance by pushing inventory to channels, the point of greatest pressure on financial statements often lags behind the actual terminal consumption downturn, and Moutai, as the leading liquor brand, is no exception. From the terminal opening rate perspective, although the first half of the year was better than the same period in 2024, the lagging effect of weak consumption has clearly been transmitted to the financial statements. The further slowdown in Q2 performance was already anticipated, but the "severe" decline in series wines overall exceeded Dolphin Research's expectations.

Beyond this anticipated dismal performance, Dolphin Research also discusses the recent "continuous decline" in wholesale prices and the impact of the alcohol ban introduced in May on Moutai.

Let's first discuss the wholesale price of Feitian Moutai, which is the market's main focus. After the first-quarter report, with the introduction of the "alcohol ban" in May, combined with e-commerce promotions, Moutai's wholesale price broke through the 2000 yuan "life and death line," dropping to a low of 1830 yuan, the lowest since 2018. This also caused Moutai's valuation to fall from 20x to a low of around 18x. Subsequently, Moutai introduced a series of strong measures to control supply and stabilize prices, bringing the current price back to around 1900 yuan.

Dolphin Research has previously estimated that at the current ex-factory price of 1169 yuan, considering the losses from bundled series wine sales, daily fixed operating expenses, and inventory holding costs, the breakeven point for Moutai distributors is roughly between 1800-2000 yuan. This means that even though the wholesale price has risen to around 1900 yuan, many small and medium-sized distributors may still face losses.

However, from the actual number of distributors disclosed in the interim report, the overall situation is still in a net increase state, with most exits being series wine distributors recruited in the past two years, indicating that Moutai's distribution rights remain extremely scarce. Distributors understand that once they exit, they will likely not have the opportunity to become Moutai distributors again in the next liquor market upcycle. Therefore, the best choice now is to weather the storm together with Moutai.

In fact, the core reason for this "continuous decline" in wholesale prices is that the positive cycle of strong terminal demand during the industry upcycle - distributors hoarding - price increase - further reluctance to sell has turned into a negative cycle of distributors dumping - price decline - further dumping during the demand downturn. To reverse this situation, the key is to strictly control supply and increase the actual opening rate of terminal consumers to reduce social inventory to a low level, which may usher in the next price increase cycle.

Additionally, regarding the "alcohol ban" that the market has been focusing on recently, Dolphin Research believes that the "alcohol ban" itself has little impact on the demand for Moutai liquor. Compared to the "alcohol ban" that restricted "three public consumption" in 2013, when government consumption accounted for over 40% of the liquor market and was Moutai's core lifeline, the current proportion is less than 5%, mainly driven by business and personal consumption. Therefore, the core factor affecting Moutai's demand in this cycle is the economic downturn, which has compressed consumer and business drinking scenarios, making this adjustment cycle longer than in 2013.

Standing at the current point, from the valuation perspective - looking at Moutai's wholesale price, Dolphin Research has estimated in "Can Moutai's Pillar Still Support the Backbone of A-shares?" based on per capita disposable income that the reasonable price level for Feitian Moutai's wholesale price is around 2200 yuan. Based on past experience, when the wholesale price deviates more than 20% from the reasonable level, corresponding to a wholesale price falling below 1800 yuan, Moutai is likely to take stronger measures to intervene and bring the wholesale price back to normal. Therefore, from this perspective, the space for further downward valuation of Moutai is not large, but upward catalysts clearly require more positive signals.

Below is a detailed interpretation of the financial report:

I. Overall performance continues to slow down

In 2Q25, Moutai achieved revenue of 39.65 billion yuan, a year-on-year increase of 7.3%, slightly below the market consensus (market expectation was 40.1 billion yuan). The core issue remains the significant decline in series wines. From the pace perspective, the overall revenue for the first half of the year grew by 9.2% year-on-year. If the same pace is maintained in the second half, achieving the annual target of 9% should not be difficult.

II. Non-standard products remain the "pillar"

In 1Q25, Moutai liquor achieved revenue of 43.56 billion yuan, a year-on-year increase of 9.7%. Although Moutai does not disclose production and sales volume in its quarterly report, considering the strict control of supply and price stabilization for Feitian, Dolphin Research speculates that the growth of Moutai liquor is more attributed to the increased contribution from non-standard liquor offerings.

In 2Q25, Moutai liquor achieved revenue of 32 billion yuan, a year-on-year increase of 11%. Considering the increased efforts to control supply and stabilize prices for Feitian, Dolphin Research speculates that the growth of Moutai liquor is more attributed to the increased contribution from non-standard liquor offerings.

Based on research information, with the increased efforts to offer non-standard liquor (kilogram-sized, effective Moutai, vintage Moutai, etc.) in recent years, the proportion of non-standard liquor in Moutai liquor has approached 35%-40%. The logic behind this is simple, besides stabilizing the price system of Feitian Moutai, it is more important to explore diversified consumption scenarios through different specifications and product types, promoting the real opening rate and reducing reliance on financial attributes.

III. Series wine sales are dismal

In 2Q25, series wines achieved revenue of 6.7 billion yuan, a year-on-year decline of 6.6%. Based on research information, although Moutai 1935 has gained strong momentum in the 700-800 yuan price range by deeply cultivating the wedding market and cooperating with specialized and innovative enterprises, other products including Prince and Welcome wines have almost all declined due to weak demand and high channel inventory.

Dolphin Research believes that the signal conveyed here is not only that mid-to-low-end series wines are difficult to sell, but also possibly to relieve pressure on distributors by reducing the forced bundling ratio of series wines.

IV. Slight increase in direct sales proportion

From the channel structure perspective, in 2Q25, Moutai's direct sales channel accounted for 43.3% of sales, an increase of 3.4 percentage points year-on-year, mainly due to increased non-standard Moutai offerings in iMoutai and group purchase channels. Meanwhile, the distributor channel only grew by 1.5% year-on-year due to channel inventory accumulation and low purchase willingness.

V. Significant decline in "reservoir" water level

From the "reservoir" contract liabilities perspective, as of the end of the second quarter, Moutai's contract liabilities were 5.51 billion yuan, a significant year-on-year decline of 45%, which also indirectly confirms the reduced willingness of series wine distributors to make payments.

VI. Increase in sales expense ratio, slight decline in profit margin

In terms of gross margin, although the proportion of Moutai liquor increased compared to the same period last year, Dolphin Research speculates that due to price promotions for some series wines, the overall gross margin slightly declined by 0.3 percentage points to 90.6%. In terms of expense ratio, due to increased market promotion expenses for non-standard and series wines, the sales expense ratio increased by 0.5 percentage points to 4.5%, while the management expense ratio remained stable. The final net profit margin slightly declined by 0.9 percentage points to 46.8%.