Analysis Report on Kweichow Moutai's Going Concern Assumption

is a fundamental premise in accounting and enterprise valuation, which assumes that an enterprise will continue to operate in the foreseeable future, and will not liquidate or cease operations due to financial difficulties or business failure. This report systematically assesses the going concern capability of Kweichow Moutai (600519.SS) from multiple dimensions including financial health, competitive advantages, industry cycles, and risk factors.

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Indicator Category	Indicator Name	Value	Industry Benchmark	Assessment
Profitability	Return on Equity (ROE)	36.48%	15%	★★★★★ Excellent
	Net Profit Margin	51.51%	20%	★★★★★ Excellent
	Gross Profit Margin	91.50%	70%	★★★★★ Excellent
	Operating Profit Margin	71.37%	25%	★★★★★ Excellent
Liquidity	Current Ratio	6.62	2.0	★★★★★ Sufficient
	Quick Ratio	5.18	1.0	★★★★★ Sufficient
Solvency	Asset-Liability Ratio	~25%	50%	★★★★☆ Low Debt
	Interest Coverage Ratio	>100x	5x	★★★★★ Extremely Strong
Valuation Level	Price-to-Earnings Ratio (P/E)	19.23x	20x	★★★★☆ Reasonable

Based on quantitative analysis of multi-dimensional financial indicators, Moutai’s going concern financial score is as follows:

Dimension	Score	Full Score	Evaluation
Profitability	25.0	30	Extremely Strong
Liquidity	25.0	30	Extremely Strong
Solvency	11.5	30	Medium (Conservative Score)
Operating Efficiency	12.3	15	Excellent
Valuation Rationality	6.4	10	Reasonable
Composite Score	80.2	100	Basically Reliable

• Kweichow Moutai’s financial status features ‘high profitability, low risk, steady growth’ [0]
• Q1-Q3 2025 operating revenue reached RMB 128.454 billion, a year-on-year increase of 6.36%; net profit attributable to shareholders was RMB 64.627 billion, a year-on-year increase of 6.25% [0]
• Current ratio of 6.62x and quick ratio of 5.18x indicate the company has extremely strong short-term solvency and liquidity reserves [0]

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Kweichow Moutai’s moat is the core support for its going concern assumption, mainly reflected in the following four dimensions:

• “National Liquor” Symbol: Moutai has a long history and is regarded as a representative symbol of Chinese liquor, occupying a unique position in consumers’ minds [1][2]
• Brand Premium: The terminal price of Feitian Moutai has long been higher than the ex-factory price, and consumers are willing to pay a high premium for the brand [1]
• Loyalty: High-end consumer groups have high loyalty and repeat purchase intention towards the Moutai brand

• Unique Production Area: Moutai production is restricted to the 15.03 square kilometer core area of Maotai Town, Renhuai City, Guizhou Province [2]
• Non-replicable: Two previous attempts to produce Moutai in other locations failed, as production depends on the local unique climate and microbial communities [2]
• Geographical Indication Protection: Received national geographical indication protection in 2001, forming a legal monopoly advantage

• “12987” Traditional Craft: 1-year production cycle, 2 times of material feeding, 9 times of steaming, 8 times of fermentation, 7 times of wine extraction [2]
• 5-Year Aging Cycle: It takes about 5 years from material feeding to ex-factory, forming a natural time barrier for production capacity
• Quality Stability: A strict quality control system ensures product consistency

• “iMoutai” Platform: Direct sales accounted for over 40% of revenue in 2023, reducing reliance on traditional distributors [1]
• Direct Sales System: Starting from January 1, 2026, six major series (Classic, Premium, Chinese Zodiac, Aged, Cultural, Low-Alcohol) will be fully launched on “iMoutai” [3]
• Channel Control: Strengthen terminal control through digital means, improving profit margins and pricing power

Indicator	Moutai’s Performance	Industry Position
Global Spirits Brand Value	1st	Global Leader
High-end Liquor Market Share	>50%	Absolute Leader
Net Profit	RMB 86.228 billion (2024)	Industry No.1
Gross Profit Margin	91.5%	Highest in Industry

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The liquor industry is experiencing the most severe adjustment period since 2015 [4]:

Indicator	Liquor Industry Average	Moutai’s Performance
Q1-Q3 2025 Operating Revenue Growth Rate	-20.04%	+6.36%
Q1-Q3 2025 Net Profit Growth Rate	-40.45%	+6.25%
Performance Stability	Generally Under Pressure	Relatively Stable

Historical data shows that Moutai can maintain positive growth even during in-depth industry adjustment periods:

• 2013-2015 Industry Adjustment Period
  : Moutai maintained positive growth in both operating revenue and net profit, demonstrating strong risk resistance capability [2]
• 2025 Industry Adjustment Period
  : Moutai achieved double growth in operating revenue and net profit in the first three quarters, significantly outperforming the industry average [0][3]

Moutai has clarified its 2026 strategic direction [3]:

Adjustment Area	Specific Measures
Product Strategy	Build a pyramid-shaped product system: Base (Regular Moutai follows market trends), Middle Tier (Premium Liquor upgraded to the second core product), Top Tier (Reduce supply of aged liquor to maintain scarcity)
Channel Reform	Cancel distribution system, build a diversified model of “self-sale + distribution + consignment sale + commission sale”, and reach terminals directly through the “iMoutai” platform
Pricing Strategy	Significant price cuts for multiple products: ex-factory price of Premium Liquor reduced from RMB 2,969 to RMB 1,859; 15-Year Aged Liquor reduced from RMB 5,399 to RMB 3,409
Market Orientation	Consumer-centric, strengthen sales momentum and market share, prioritize volume over price

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Risk Category	Risk Level (1-5)	Description
Operational Risk	2	Financially healthy, abundant cash flow
Financial Risk	1	Virtually debt-free, sufficient liquidity
Market Risk	3	Fluctuations in consumer demand, impact of industry cycles
Regulatory Risk	2	Policy-regulated, but classified as a “historical classic industry”
Industry Cycle Risk	4	The liquor industry is in an adjustment period

• High-end liquor consumption is positively correlated with economic prosperity; demand may contract during economic downturns [1]
• Changes in residents’ consumption capacity and willingness will affect demand for Moutai products

• Policies such as alcohol bans may affect government consumption scenarios
• Adjustments to tax policies may affect profit margins
• Increasingly strict industry regulation, such as the implementation of the new national standard for sauce-flavored liquor [4]

• Acceptance of liquor among young consumer groups may decline
• Changes in consumption habits may affect long-term demand structure

• Fluctuations in Moutai’s wholesale and terminal prices affect channel profits and corporate performance
• Recent product price cuts indicate that the company is proactively adapting to market changes [3]

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Factor	Intensity	Description
Financial Soundness	95	Low debt, high cash flow, strong profitability
Brand Competitiveness	95	National Liquor status is difficult to shake
Product Scarcity	92	Geographic + Craftsmanship + Time Barriers
Industry Position	98	Top global spirits brand
Channel Control	88	Strengthened digital direct sales system

Factor	Impact Degree	Description
Policy Environment	30	Regulated, but traditional industry development is supported
Consumer Demand	25	Under short-term pressure, but has long-term support
Growth Momentum	28	Shifting from high-speed growth to steady growth

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Assessment Dimension	Score	Conclusion
Financial Health	★★★★★	Extremely high liquidity, low debt, strong profitability, solid financial foundation
Competitive Advantages	★★★★★	Four moats of brand, geography, craftsmanship, and channels, with deep barriers
Industry Position	★★★★★	Top global spirits brand, absolute leading position
Risk Management	★★★★☆	Strong risk awareness, proactively adapts to market changes
Development Sustainability	★★★★☆	Maintains growth during industry adjustment period, highly resilient

1. Solid Financial Foundation
   : Coexistence of ultra-high profitability (ROE 36.48%, net profit margin 51.51%) and extremely strong liquidity (current ratio 6.62), forming a solid financial safety cushion [0]
2. Deep Moats
   : Four barriers of brand, geography, craftsmanship, and channels form composite competitive advantages, which are difficult to replicate or surpass in the short term [1][2]
3. Stable Industry Position
   : Top global spirits brand, occupying an absolutely dominant position in the high-end liquor market
4. Historical Resilience Verification
   : During the two in-depth industry adjustment periods of 2013-2015 and 2025, Moutai demonstrated significant risk resistance capability and maintained positive growth
5. Proactive Strategic Adjustments
   : Facing industry cycle changes, the company is actively promoting market-oriented transformation, channel reform, and product strategy adjustments, and the management has demonstrated strong risk response capabilities [3]

• Industry Cycle Risk
  : The liquor industry is still in an adjustment period, and there is uncertainty in the timing and intensity of demand recovery
• Valuation Fluctuation
  : The current P/E ratio is about 19x; if market sentiment deteriorates, it may face valuation compression
• Policy Uncertainty
  : Changes in macroeconomic policies and industry regulatory policies may affect the operating environment

: Relying on its unique competitive advantages, stable financial status, and profound historical accumulation, Kweichow Moutai’s going concern assumption is basically valid. During the current industry adjustment period, the company is consolidating its long-term competitive advantages through proactive strategic adjustments, and is expected to maintain its leading position in the industry recovery in the future.

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[0] Jinling AI Financial Database - Kweichow Moutai Company Profile, Financial Analysis, Real-Time Quotation Data
[1] Jinling AI - Valuation Analysis of Kweichow Moutai: A Multi-Dimensional Framework for Judging Undervalued Stocks (https://www.gilin.com.cn/essence0711924.html)
[2] Fortune Securities - Beverage Manufacturing Brands Have Deep Moats, Moutai’s Performance Growth Has High Certainty (https://pdf.dfcfw.com/pdf/H3_AP202105061490061529_1.pdf)
[3] The Paper - Liquor in 2026: The Long-overdue and Protracted Bottoming-Out Has Just Begun (https://m.thepaper.cn/newsDetail_forward_32356066)
[4] Sina Finance - Moutai Prices “Plunge”, Liquor Sector Performance Cools (https://finance.sina.com.cn/stock/stockzmt/2026-01-14/doc-inhhhnwp8269558.shtml)
[5] CSDN - A Brief Discussion: Moutai’s Moats: The Power of Geography, Craftsmanship, Scarcity, and Brand (https://blog.csdn.net/mjarqa/article/details/150529865)