Thursday, October 25, 2012
Dukang Distillers / China Liquor: Last week, following a major alcohol and confectionary trade fair in Fuzhou, over 8,000 co’s attracted around 100,000 visitors. It is quite clear that the resulting rally in F&B stocks listed in China last wk was in large part due to the upbeat sentiment and widespread industry attention given the listed firms displaying their goods at the Fujian Province exhibition. Not only did the F&B sector put in the best performance last week among all A-shares, but the heaps of positive attention helped attract the above-mentioned one billion yuan in capital – not a bad return on investment for listed exhibitors, to be sure. The F&B sub-index rose an impressive 4.5%, pushing its average P/E ratio to 25.4x. (Dukang stands at 6.45x) And judging by the looks of the stocks drawing the most investor attention amid this latest sudden influx of capital, it looks like a lot of folks are thirsty for some healthy returns. The 15 firms most prominently on the radar include Anhui Golden Seed Winery (SHA:600199), iconic Chinese liquor distiller Kweichow Moutai (SHA:600519), spirit-making rival Wuliangye Yibin (SZA: 000858), peer Luzhou Lao Jiao (SZA: 000568), Jiugui Liquor (SZA: 000799) and the capital’s top beermaker Beijing Yanjing Brewery (SZA: 000729). The above firms excluding Yanjing Brewery, each saw over Rmb 100m yuan in new investment, signaling that the sector is ready to get frothy. Recall also earlier in Oct, that Wuliangye Yibin, one of China's top liquor makers, forecast a nearly 90% surge in net profits in 3Q12 over strong sales and price rises.