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Signature 1 …….…………Ruohan. Wei………… Date …….……………………………………

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1. Executive Summary

An analysis of Kweichow Moutai and Wuliangye's annual reports and ESG disclosures from 2022 to 2024 reveals distinct differences in financial performance, market positioning, and environmental stewardship. While Moutai maintains high gross margins, strong brand equity, and stable revenue growth through its upstream supply chain ecosystem, its market valuation is approximately 10 times higher than Wuliangye's, reflecting substantially higher operational costs. Conversely, Wuliangye demonstrates faster revenue expansion and stronger liquidity, though its Return on Assets (ROA) and Return on Equity (ROE) metrics lag behind Moutai's, with ESG reporting lacking the same long-term perspective. Both stocks exhibit long-term investment potential, but given Moutai's superior profitability and industry leadership, we recommend prioritizing a heavy position. Investors should carefully evaluate their cost-benefit analysis and align decisions with personal risk tolerance and capital allocation objectives.

2. Introduction

In 2024, the liqueur industry experienced a contraction in overall scale, with an average inventory turnover period of 900 days and a supply-demand imbalance in the market. However, the sector demonstrated a "volume decline with profit growth" trend. The total profit reached 250.87 billion yuan, up 7.8% year on year (KPMG, 2025).The total output of liquor companies in 2024 was 3,145 million liters, continuing the trend of output contraction.

(Figure 1: Liquor Industry Production)

Moutai and Wuliangye achieved year-on-year growth in both total operating revenue and total profit, showcasing strong profitability. This success stems from their deep-rooted brand advantages and channel control. Industry leaders have achieved steady growth by optimizing product portfolios, enhancing brand value, and strengthening channel management, further amplifying the Matthew effect.

Both companies released ESG reports for 2022-2024, demonstrating strong commitment to sustainability by integrating green production, social responsibility, and corporate governance into their core strategies. However, Wuliangye's ESG report lacks key data, notably omitting its 2024 carbon emissions. This gap has resulted in lower transparency and international recognition for Wuliangye's ESG report compared to Moutai's. This report aims to provide the public with a more comprehensive understanding of both companies by analyzing and comparing their development, thereby offering more credible and comprehensive investment advice.

Below, we will analyze their development and differences through a multidimensional comparison of financial performance, market positioning, and sustainable development strategies.

3. Financial Analysis

The following financial ratios are derived from the 2022-2024 annual reports of Kweichow Moutai and Wuliangye.

(Figure 2: Financial Ratio) 

3.1. Profitability

The comparison reveals that Moutai consistently outperforms in key metrics including net profit margin, gross margin, and return on equity, demonstrating superior profitability and cost control. We will now examine the reasons behind Wuliangye's lower profitability compared to Moutai.

Wuliangye's under-performance in ROA and ROE metrics primarily stems from its lower proportion of premium liquor products compared to Moutai, resulting in a lower net profit margin. Moreover, Moutai's stronger brand premium and scarcity give it greater pricing power, further widening the profitability gap.

(Figure 3: ROE Comparison)

(Figure 4: ROA Comparison)

In 2024, the median gross margin of 19 Chinese liquor companies stood at 73.16% (Xinlang, 2025) . Moutai led the pack with a 91.82% gross margin, while Wuliangye's 79.68% margin, though above the median, fell significantly short. To capture market share in lower-tier regions, Wuliangye has ramped up promotions for mid-to-low-end products, driving up their market share and dragging down overall margins. The company also implemented price cuts for premium products in 2024, reducing prices by about 8% compared to 2022 without corresponding cost reductions. In contrast, Moutai maintained its premium positioning with steady price increases. Its Feitian Moutai's ex-factory price rose by approximately 5% in 2024 compared to 2022, demonstrating strong retail pricing power. Combined with improved production capacity utilization and supply chain optimization, Moutai further solidified its high-margin advantage.

3.2. Liquidity

Both Moutai's current and quick ratios have consistently remained above 3.4, demonstrating strong short-term debt repayment capacity with a steady upward trend in recent years. While Wuliangye's ratios hover around 3.4 to meet short-term debt coverage needs, they still lag behind Moutai's performance. The company's substantial promotional investments and channel inventory pressures have partially consumed cash flow, resulting in reduced capital utilization efficiency.

(Figure 5: Current Ratio Comparison)

(Figure 6: Quick Ratio Comparison) 

However, we observed a significant decline in Wuliangye's current and quick ratios in 2024. This was primarily due to the company's first-ever dividend policy implemented in Q3 2024, with the nearly 100 million yuan dividend payment not being made until January 2025. To facilitate better year-on-year comparisons, we adjusted the accounting entries for Wuliangye and calculated the current ratio at 3.80 and the quick ratio at 3.35. While these figures show a slight decrease compared to 2023, the overall ratios remain relatively stable.

In terms of Cash Ratio, Wuliangye's figure is twice that of Moutai, demonstrating its continued liquidity advantage. With cash reserves exceeding its corporate scale, the company maintains strong short-term debt repayment capacity.Notably, Wuliangye maintains a high cash ratio even after implementing its dividend policy, demonstrating the foresight and flexibility in its financial management.

(Figure 7: Cash Ratio Comparison) 

3.3. Stability

Both companies maintain an investment coverage ratio of 1, demonstrating strong debt repayment capacity and low financial risks. This indicates that they can reliably fulfill their debt obligations through stable cash flows, regardless of economic fluctuations or intensifying industry competition. While Moutai also possesses robust liquidity, Wuliangye demonstrates a slight edge in balancing capital utilization efficiency with short-term solvency. This characteristic provides greater flexibility in navigating market uncertainties, further strengthening investor confidence.

However, Wuliangye's gearing ratio lags slightly behind Moutai, with a 10-percentage-point gap. This indicates a relatively high debt-to-equity ratio in its capital structure, though still within the industry's reasonable range. As previously noted, Wuliangye's dividend policy underwent a regulatory change. To ensure comparability, the adjusted gearing ratio for 2024 stands at 0.23. While this represents a slight increase from previous figures, it remains within normal parameters. The modest rise does not compromise its financial stability. 

3.4. Investment Ratio

Overall, Moutai's return on investment significantly outperforms Wuliangye's, with its EPS being approximately eight times Wuliangye's for three consecutive years, demonstrating stronger capital appreciation capabilities. However, Wuliangye's EPS has also shown steady annual growth, averaging about 9.5% per year, reflecting strong profit growth potential and still offering its own merits.

(Figure 8: Gearing Ratio Comparison)

In terms of P/E ratio, Wuliangye's current valuation slightly exceeds the industry average, reflecting market expectations for its future growth. However, it still lags behind Moutai, indicating investors' relatively conservative valuation premium. Nevertheless, as the brand's momentum gradually unfolds and channel reforms deepen—coupled with the enduring structural growth logic of premium Wuliangye continues to optimize its product portfolio and enhance operational efficiency. These efforts are steadily narrowing the valuation gap with industry leaders, thereby continuously strengthening its medium-to-long-term investment appeal.

Moreover, their investment costs differ significantly. Wuliangye's stock price is around 110 yuan, making it more affordable than Moutai's 1,400 yuan, thus offering better value for money in portfolio allocation.

4. ESG / Non-Financial Analysis

ESG performance is becoming a new strategic direction for Chinese liquour leading companies to cope with domestic stock competition and develop international incremental markets.

4.1. Environmental Elements:

According to Moutai's three-year ESG report, the company has achieved 100% waste recycling rate for three consecutive years, with both total waste density and wastewater discharge intensity showing annual declines. Its carbon emission intensity has consistently remained below the industry average, dropping 11.3% in 2024 compared to 2022. By 2024, Moutai will achieve 100% green power coverage in its industrial parks, with renewable energy accounting for over 7% of total energy consumption (Moutai, 2024). Additionally, the company was awarded national and provincial "Green Factory" titles in 2024 (Moutai, 2025). However, the accounting and disclosure of Scope 3 are still in the early stages of industry exploration for Moutai.

In contrast, Wuliangye's three-year ESG report demonstrates a consistent annual decline in carbon emission intensity, with a cumulative reduction of 9.8% from 2022 to 2024. The company maintains a stable resource utilization rate of over 95% for its brewing waste. Renewable energy now accounts for 5.2% of total energy consumption, and it plans to establish a zero-carbon brewing demonstration zone by 2025. However, some disclosures lack continuity, key environmental indicators remain unquantified, and green production measures are vaguely described. The 2024 report notably omitted core metrics such as energy and water consumption per unit. Additionally, waste treatment capacity has failed to keep pace with production growth, resulting in a continuous increase in waste disposal rates (Wuliangye, 2024).

4.2. Social Elements:

From 2022 to 2024, Kweichow Moutai Group continued to advance public welfare projects such as "Moutai China Pillar," assisting over 120,000 underprivileged students, with annual public welfare investment maintaining an average annual growth rate of over 15%. The group has consistently focused on rural revitalization, investing more than 480 million yuan over three years, covering impoverished counties in over 20 provinces. The employee compensation and welfare system has been continuously improved, with per capita annual income maintaining stable growth and employee turnover rate remaining below 1% for three consecutive years (Moutai, 2022-2024). In terms of sustainable supply chain development, Moutai has continuously optimized supplier access and evaluation mechanisms, incorporating environmental, social, and governance performance into the evaluation system, promoting upstream and downstream enterprises to jointly practice sustainable development concepts.

Wuliangye has been actively implementing social welfare initiatives. From 2022 to 2024, the company invested a total of 360 million yuan in rural revitalization and educational assistance programs. Its "Wuliangye Dream Support Program" has helped over 50,000 underprivileged students. Employee income grew at a compound annual growth rate of 7.8% over three years. By 2024, safety training coverage exceeded 98.6%. The retention rate of core talent has remained above 95% for three consecutive years (Wuliangye, 2022-2024). In terms of supply chain sustainability, ESG standards are being progressively integrated into procurement decisions, with enhanced social responsibility reviews of suppliers focusing on labor rights, workplace safety, and community impact.

4.3. Governance Elements:

Moutai liquor won the EFQM Global Award in 2024, becoming the first Chinese liquor company to receive this honor (Moutai, 2024). Its three-year ESG report details the implementation of governance structures, risk control mechanisms, and anti-corruption policies.  In 2024, Moutai launched the "double materiality" ESG framework for the first time, identified 16 key issues, upgraded "compliance internal control" to "compliance management" and integrated it into the whole process. The board of directors holds an average of 13-14 meetings annually, and the decision-making standardization continues to improve.The main controversies focus on environmental footprint and resource consumption, but the company is reducing energy consumption and emissions in the production process through technological upgrades and circular utilization models.

Wuliangye has been nominated for the 2025 EFQM Global Award (Strong Soup, 2025). Its ESG report highlights continuous improvements in board structure and governance mechanisms. The board established strategic, audit, compensation, and nomination committees, along with a newly created Environmental and Social Responsibility Committee, to deepen the integration of governance and sustainable development. Wuliangye also formed a dedicated ESG task force to coordinate environmental protection, social responsibility, and corporate governance issues. Meanwhile, the company has enhanced information system transparency by regularly disclosing key data on environmental performance, supply chain management, and charitable investments. While the main controversy centers on increased environmental burdens from production capacity expansion, the company actively addresses these challenges through green factory construction, promotion of clean production, and energy efficiency improvements.

Overall, Moutai and Wuliangye have emerged as industry leaders in corporate governance, ESG system development, and technological innovation strategies. However, Wuliangye still has room for improvement in data transparency, the timeliness of governance mechanisms, and long-term sustainability. It should further enhance the comprehensive disclosure and dynamic updates of ESG information.

5. Comparative Discussion

Through the detailed analysis above, Moutai has significantly outperformed the industry in financial terms, rightfully earning its position as the undisputed leader. Its MSCI ESG rating has been upgraded to BBB, enhancing its long term value. Notably, in 2025, Moutai became the only company in the liquor industry to enter the Fortune China ESG Impact List (Moutai, 2025). However, Wuliangye remains one of the key leading enterprises in the liquor industry, continuously strengthening its brand value, market share, and high-end product portfolio. Although there is a gap in financial performance compared to Moutai, Wuliangye maintains a steady growth trend, with gross and net profit margins remaining at industry-leading levels. In 2025, it further advanced its digital transformation and green supply chain upgrades, achieving significant improvements in ESG ratings and narrowing the overall gap with Moutai in sustainable development. Both companies' financial and ESG reports highlight their strong commitment to sustainable development.

However, investors should remain vigilant as the liqueur industry grapples with multiple challenges, including evolving consumption patterns, tightening environmental regulations, and growing international market pressures. Younger generations show limited appetite for traditional high-proof liqueur, with only 9% regularly consuming it, while over 60% prefer low-alcohol alternatives like wine and whiskey (Ailai, 2025). This shift is compelling baijiu producers to accelerate product innovation and diversify their offerings, driving a transition toward lighter, trendier, and healthier options. Wuliangye has already ventured into the youth market by launching new products like fruit-flavored baijiu and wellness-focused varieties.

Our investment recommendation highlights that both companies demonstrate long-term value, but investors should closely monitor their transformation progress and ESG sustainability. Moutai remains the top choice, leveraging its brand strength and comprehensive sustainable development strategy, while Wuliangye emerges as a flexible allocation option due to its more attractive valuation and improving reform. outcomes. Investors should focus on their performance in youth-oriented initiatives, global expansion, and green production. However, given the domestic market share limit, its stock acquisition cost is relatively high, requiring investors to make prudent allocations based on their specific circumstances. Simultaneously, investors should comprehensively evaluate market conditions and policy directions according to their investment context, diversifying portfolios to balance risks. In the short term, caution is advised regarding performance fluctuations caused by weak consumption recovery, while medium-to-long term attention should be directed to the sustainability of corporate innovation capabilities and ESG practices.

6. Conclusion

In summary, both Moutai and Wuliangye stand as industry leaders in China's baijiu sector, each with distinct strengths in brand equity, market expansion, and premiumization strategies. Leveraging their scarcity and strong brand influence, Moutai continues to solidify its premium positioning, while Wuliangye enhances operational efficiency through product portfolio optimization and digital transformation. Both companies are advancing green production and sustainable governance under the ESG framework. However, given the sluggish consumer recovery, they must further strengthen channel resilience and reach younger demographics. The future competition will hinge on the synergistic advancement of technological innovation efficiency and internationalization efforts.

 However, it is worth noting that this report has certain limitations. Firstly, the analysis is based on publicly available data from 2022-2024, which may not fully reflect the latest strategic adjustments and technological breakthroughs in the industry. Secondly, from a macroeconomic perspective, young consumers' preference for liquor continues to decline, creating uncertainties for the long-term market demand. Investors should conduct thorough evaluations of the sector, focusing on companies' ability to adapt to shifting consumption patterns, and exercise caution when making investments.

Word Count: 2477 words

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Contribution：

Declaration：

We confirm that the above table accurately reflects the contributions of each group member. All members have reviewed and agreed on the allocation of percentages.