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UPDATE 1-Liquor maker Moutai's heady profits underscore China luxury revival
October 26, 2017 / 5:39 AM / a month ago

UPDATE 1-Liquor maker Moutai's heady profits underscore China luxury revival

* Moutai Q3 profits up 138.4 pct, best since 2011

* Shares rise 6 pct on Thurs, up nearly 80 pct YTD

* China’s wider luxury market rebounding - analysts (Recasts, adds analyst comments, share price move)

By Adam Jourdan

SHANGHAI, Oct 26 (Reuters) - If sales of expensive, fiery liquor baijiu are anything to go by, China’s luxury shoppers are back in town.

Kweichow Moutai Co Ltd, China’s top maker of baijiu whose bottles can sell for over $300 a pop, saw its revenues and profits more than double in the third quarter - the sharpest quarterly rises in over half a decade.

The steep jump underscores a luxury revival in the world’s second largest economy, whose shoppers drive around a third of global luxury sales and are key to driving demand for Prada handbags to Remy Cointreau liquor.

Spending on luxury goods in China dipped 2 percent last year on the back of a prolonged crackdown on extravagance and corruption but is estimated to rise 15 percent this year to about $24 billion, according to consultancy Bain & Co. Chinese consumers - who often shop overseas - are expected to spend nearly $100 billion on luxury globally this year.

Moutai, once a staple of China’s revolutionary leaders and now the world’s most valuable liquor maker, said its net profit hit 8.7 billion yuan ($1.31 billion) in the July-Sept quarter, up 138.4 percent against the same period a year earlier.

The firm’s sales also rose strongly, up close to 60 percent in the first nine months of the year to 42.5 billion yuan and rising around 116 percent for the quarter - the biggest quarterly sales jump since mid-2008.

“RED ARMY”

The liquor maker’s share price and sales have shrugged off a long-running corruption crackdown that has targeted lavish spending by officials and military - once key buyers of pricey Moutai.

“Luxury is back in China. The market is rebounding and people who skipped on purchases for a few years are now looking to spend again,” said Shaun Rein, Shanghai-based managing director of China Market Research Group.

Moutai’s shares were up around 6 percent to a record high on Thursday after the results, bringing its gains to about 80 percent this year. It is up over 450 percent since the start of 2014, which has driven its market capitalisation to about $113 billion, well past that of British rival Diageo.

Moutai, a household name in China, was once hailed as helping its Red Army survive the tortuous Long March in the 1930s. The pungent, colourless spirit baijiu, usually made from sorghum, outsells vodka worldwide.

The firm, China’s top baijiu maker that competes with Wuliangye Yibin Co Ltd, saw its Jan-Sept net profit rise 60 percent against 2016. ($1 = 6.6350 Chinese yuan renminbi) (Reporting by Adam Jourdan; Editing by Stephen Coates and Muralikumar Anantharaman)

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