Goldman Just Can't Stop Raising Its Target on This Liquor Maker

Workers package China Kweichow Moutai liquor at the company's facility in Zunyi, Guizhou Province.

Photographer: Nelson Ching/Bloomberg

Kweichow Moutai Co., the manufacturer of an expensive liquor popular in China, has a fan in Goldman Sachs Group Inc.

Goldman has raised its target price for the Shanghai-listed company 11 times this year. In its latest increase, the brokerage lifted the estimate by 18 percent to 881 yuan, the highest among analysts tracked by Bloomberg. The new target implies a gain of 29 percent in the next 12 months for the company, which earlier this year overtook Diageo Plc as the world’s most-valuable distiller.

Goldman cited Moutai’s move to make distributors sell more on its online platform as the catalyst for its increased bullishness. The new retail model will squeeze distributors’ "outsized" margins and "significantly" boost the company’s earnings by allowing it to raise its ex-factory price more regularly, according to a note published Wednesday by analysts Xufa Liao and Brian Dai.

It’s certainly paid off to be bullish on Moutai. After the company successfully navigated an anti-corruption campaign by targeting a broader consumer audience rather than relying on official banquets, the shares have taken off with earnings. The stock has risen almost 400 percent in the past three years, compared with a 58 percent gain by China’s CSI 300 Index of large-cap shares. Moutai’s net income more than doubled in the third quarter to 8.7 billion yuan ($1.3 billion).

— With assistance by Ryan Lovdahl

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