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Chinese liquor makers seek listings as investors keep spirits up

06/08/2020 | 05:25am EST

Two more liquor makers have sought listings in China, riding a wave of investor enthusiasm over spirit makers which has helped push their shares to record highs.

Sichuan Langjiu applied to the securities watchdog for a 7.45 billion yuan ($1.05 billion) Shenzhen initial public offering over the weekend, the second liquor company to do so in just weeks.

Guizhou Guotai Liquor filed for a 2.5 billion yuan IPO in Shanghai in late May.

Both Langjiu and Guotai said they would use the proceeds of to fund production and replenish working capital.

Investors are chasing China's consumer stocks, expecting further stimulus to boost domestic demand as the coronavirus outbreak hits demand from overseas.

Industry bellwethers Kweichow Moutai Co Ltd and Wuliangye have scaled new highs in recent months, with Moutai's market value now second only to Industrial And Commercial Bank Of China in the A-share market.

The CSI liquor index <.CSI399997> has advanced to a fresh peak since its launch in early 2015. So far this year, the index has gained 13% following a near 100% rise in 2019.

"Those companies could enjoy premiums in valuations if they go public at the time when the whole sector is favoured by investors," said Song Zhenyu, a fund manager at Beijing Jiayi Asset Management Company.

"Currently, liquor makers have the best and most stable earnings among all sectors in the A-share market," he said.

Langjiu logged a net profit of 2.44 billion yuan in 2019, up from 726 million yuan in 2018, while Moutai posted a 17% jump in net profit during the first quarter of 2020, despite the epidemic.

Analysts at Pingan Securities attributed Langjiu's profit surge over the past three years to price rises and substantially lower advertising costs.

(Reporting by Luoyan Liu and Brenda Goh; Editing by Nick Macfie)


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
BANK OF CHINA LIMITED 0.74% 2.73 End-of-day quote.3.02%
BEST INC. -1.34% 2.0611 Delayed Quote.2.45%
JD.COM, INC. -1.23% 88.2 Delayed Quote.1.52%
KWEICHOW MOUTAI CO.,LTD. -2.44% 2082 End-of-day quote.4.20%
SEEK LIMITED -0.73% 27.1 End-of-day quote.-5.01%
SHANGHAI STOCK EXCHANGE B SHARES INDEX 0.06% 250.6612 Real-time Quote.2.89%
SHENZHEN STOCK EXCHANGE A SHARE INDEX 0.30% 2477.41 Real-time Quote.1.33%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.25% 6.4799 Delayed Quote.-0.48%
WULIANGYE YIBIN CO.,LTD. -0.59% 287.7 End-of-day quote.-1.42%
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