BY YAWEN CHEN
Xi Jinping isn’t going anywhere, but there will be a new Chinese corporate leader. Rapidly changing policy initiatives and investor attitudes threaten the reign of distiller Kweichow Moutai as the biggest mainland-listed company by market capitalisation. Look for battery maker Contemporary Amperex Technology, or CATL, to epitomise the economic transition by charging into the top spot.
Moutai overtook state-controlled Industrial and Commercial Bank of China in early 2020. Even after a slide in the baijiu producer’s stock price in 2021, its equity was worth some $420 billion as of mid-December, more than enough to retain the crown and a weighty spot among domestic and international indexes.
The lofty position, obtained by selling booze for lavish state and business dinners, hardly squares with Xi’s common prosperity drive and a cooling economy. Moutai also has been curiously allocating capital to government projects.
In the meantime, $240 billion CATL is trending in the other direction. Xi’s push for a greener economy prompted a target for electric vehicles to account for a fifth of Chinese car sales by 2025. The goal could be reached as early as 2022, suggesting explosive demand.
Boss Robin Zeng is adeptly navigating the situation. CATL’s revenue more than doubled in the first three quarters of 2021 from the previous year. With little debt and some $7 billion of additional equity being raised, the company should be able to keep expanding production and developing fresh technology.
CATL is already richly valued at 80 times its $3 billion of expected 2022 earnings per Refinitiv. And yet smaller rivals such as BYD and Gotion High Tech fetch over 100 times, as do electric-car makers such as Tesla, to which CATL is a major supplier. If some of that extra exuberance rubs off and CATL grows its bottom line a little more than the anticipated 70%, it could easily be worth more than $300 billion.
On the flip side, Moutai’s mounting challenges stand to disappoint growth expectations and hurt its 44 times forward valuation multiple. Even a 20% dip would still leave a healthy premium to peers Diageo and Pernod Ricard. By the end of 2022, it’ll be time to toast CATL as China’s new equity leader.
First published January 2022