China's leading traditional liquor producer
Kweichow Moutai is a leading producer of premium alcohol in China. In 2012, the Chinese government’s policy to control government entertainment budgets began to impact its sales and concerns about an economic slowdown also hurt sentiment.
Our research approach highlighted that investors had overlooked an almost debt-free balance sheet, healthy cash flows and an attractive return on equity. Furthermore, the stock not only had a limited downside but also offered a good dividend yield.
Our consumer analyst upgraded Kweichow Moutai to a buy in April 2013 and retained their conviction in the stock even during the A-share downtrend seen in China in 2015. Since our analyst's buy recommendation, the stock has delivered a return of 117% compared to the index (Shanghai A share) return of 42%.^