Employees work on the production line of Kweichow Moutai Co Ltd in Zunyi, Guizhou province. [Photo/China Daily]

Spirit maker rides crest of wave of improved performance in previously weak sector

Kweichow Moutai Co Ltd, the distiller of the iconic high-end spirt in the town of Maotai, Guizhou province, has seen its share prices continue rising this year, while the benchmark index and most other shares turned in lukewarm performances.

The Shanghai-listed Moutai have surged about 45 percent in the year to date, and the stock is regarded as one of the bourse's best-performing and stable ones.

Moutai is stepping into the insurance sector, with its parent company being one of the main shareholders in a new insurer, known as Huagui Life Insurance Co Ltd, Moutai said in a statement on Thursday.

The China Insurance Regulatory Commission gave Moutai the green light to launch the new Guizhou-based insurance company.

Many analysts have continued to raise their forecasts for Moutai and said they expect that its share price is likely to rise another 10 percent.

On Thursday, Moutai shares slipped 0.09 percent, and closed at 316.91 yuan ($47.44), as most other shares and the benchmark index fell.

Earlier this week, Moutai shares jumped for three days and reached 318 yuan on Wednesday, hitting a record high since the company started public trading in 2001.

Huang Fusheng, an analyst at China Securities Co Ltd, said he had set a price target for Moutai shares of 345 yuan per share. He said the Chinese spirit sector has transitioned to a strong recovery period.

Analysts said the spirit industry has now completed a period of adjustment over the past three years, and companies have welcomed a new cycle of improving financial performance.

They said that previously the sales of high-end spirits plummeted in China, largely due to the government's austerity drive and anti-graft campaign and also the economic slowdown, which saw general levels of liquor consumption shrink.

In the first quarter of this year, Moutai achieved sales revenues of 9.99 billion yuan, up 16.91 percent year-on-year. The company's net profits for the same period were 4.89 billion, up 12 percent on the previous year.

"In the second half of the year, the price of Moutai is expected to continue to grow, driven by booming seasonal demand. Before Mid-Autumn Festival in September, Moutai is likely to carry a price tag of more than 900 yuan per bottle," said Hu Yanchao, an analyst at Zhongtai Securities Co.

In the long term, Moutai is expanding and strengthening its sales channels. Some analysts said the traditional Chinese spirit maker still holds potential for another 20 to 30 percent of growth in its valuation.