(Yicai Global) July 22 -- Kweichow Moutai is forecasting a 20 percent jump in profit in the first six months from the same period last year despite the impact of a recent resurgence of Covid-19 on the catering industry as China’s leading liquor maker’s strong emphasis on a direct sales model with a higher profit margin pays dividends.

Kweichow Moutai is expecting to rake in net profit of CNY29.7 billion (USD4.4 billion) in the six months ended June 30, the Zunyi, southwestern Guizhou province-based firm said yesterday. Revenue should soar 17 percent to CNY59.4 billion (USD8.7 billion).

The strong earnings are a direct result of Kweichow Moutai’s robust support for direct sales channels, which have a higher profit margin, Xiao Zhuqing, a liquor industry expert told Yicai Global. In the first quarter, revenue from direct sales more than doubled year on year to CNY10.8 billion (USD1.6 billion), nearly half of last year’s total revenue.

Kweichow Moutai has also added some new trending products, such as ice cream, which have helped boost earnings, Xiao said. And the company continues to improve its sales channels, prices and products.

Financial data for specific business segments will be available once the interim report is released, a person in the securities sector told Yicai Global. Kweichow Moutai has no capacity expansion plans at present, he added.

Big Players

Recurring outbreaks of Covid-19 have hit China’s catering sector badly and alcohol sales have fallen. Of the first-half data from mainland distillers released so far, it is clear that the bigger firms are able to weather the storm better than smaller ones.

Shunxin Agriculture said profit could sink by as much as 93.2 percent year on year while Golden Seed Winery is bracing for losses of up to CNY58 million (USD8.5 million). Gansu Huangtai Wine-Marketing Industry, by contrast, is anticipating profit to more than double due to some recent land sales.

In the second quarter, Kweichow Moutai ousted battery giant Contemporary Amperex Technology as the country's largest high-weighted stock, according to data from TX Investment Consulting. There are four liquor stocks in the top 10 high-weighted stocks, all of them leading brands. These are Kweichow Moutai, Wuliangye, Luzhou Laojiao and Shanxi Xinghuacun Fen Wine Factory.

Investors should focus on high-end and resilient mid-level liquor brands this year, Soochow Securities said in a recent report.

Kweichow Moutai’s share price [SHE:600519] closed up 0.41 percent today at CNY1,947 (USD288), giving it a market valuation of CNY2.4 trillion (USD362.1 billion) and making it the most valuable company on the mainland.

Editors: Shi Yi, Kim Taylor