Morningstar | Wuliangye’s Fourth-Quarter Results Beat Our Expectations, Raising Our Fair Value Estimate to CNY 80
We are raising our fair value estimate for wide-moat Wuliangye Yibin to CNY 80 per share from CNY 72, after taking account into better-than-expected 2018 profits and the time value of money. We now anticipate the company’s revenue and net profit to grow at CAGRs of 15.8% and 17.6% over 2018-22, with the volume growth of the high-end and mass-market liquors growing 10.6% and 15%, respectively, along with an average ex-factory price hike of 5%, driven by more contribution from its new premium liquors (such as 501 Wuliangye and new versions of Wuliangye). We anticipate that gross margin and operating margin will be maintained at their high plateaus of 74% and 44%, respectively, through 2022, backed by the company’s strong pricing power and premium positioning. Following a strong rally year to date, we think the share prices are fairly valued at current levels.Wuliangye reported its preliminary 2018 results ahead of our expectations, with revenue increasing 32%-33% to around CNY 40 billion and net profit growing between 37% and 40% to around CNY 1.34 billion. The implied fourth-quarter revenue was up 31% year on year, which was much higher than our 10% year-on-year growth forecast previously. Net profit in the fourth quarter increased 44% year on year, which also surpassed our 15% year-on-year growth.
Sales volume of premium Wuliangye liquors was 20,000 metric tons for 2018. Management guided its sales volume for high-end liquors will increase 3,000 metric tons to achieve 23,000 metric tons in 2019, about 15% increase from 2018, while expecting the average selling price to rise at 10%.
Wuliangye's key strategies in 2019 are to strengthen its brand value and implement digitalized distribution channel management. Most importantly, it will launch more premium liquors, including a whole new design (since 1995) of packaging for its flagship Wuliangye 52-degree (expected to roll out in June, and the old version will be terminated in the second quarter of 2019).
Wuliangye Yibin is engaged in manufacture and sale of "Wuliangye" liquors and other series of alcoholic drinks. Through its subsidiaries, Co. is also engaged in the supply of raw materials; packaging and publication printing; investment activities; provision of parking service; and manufacture and sale of industrial-used steams, fine chemicals, fruit wines, white wines, white carbon, and black and lactic acids.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.