EQUITY traders rarely pay this much for the world’s most profitable distiller.

Up 65 percent this year alone, Shanghai-listed Kweichow Moutai Co. is reaching all kinds of milestones. It’s become the second-largest company listed on the Chinese mainland, and on track to be the first priced at 1,000 yuan (US$148.59) apiece.

The firm commands a premium over all of China’s major consumer staples, and has just leapfrogged global giants like Anheuser-Busch InBev SA, Unilever and HSBC Holdings Plc in market value for first time.

But trading at almost 30 times projected earnings, Moutai is nearing the multiple that has often capped gains in the past decade. Whether China’s middle class will continue to splurge on liquor is a key question for analysts after the stellar start to the year. The concern is that investors have set too high a bar for 2019 because Moutai often beats its own guidance.

“Valuation is a concern in the market now,” said Dai Ming, Shanghai-based fund manager at Hengsheng Asset Management Co. “All the good news from its first-quarter earnings have been priced in.”

Moutai’s valuation peaked at 28 times projected earnings last week. That compares with the average multiple of around 12 for members of the CSI 300 Index. Its smaller rival Wuliangye Yibin Co., whose shares have almost doubled this year, is the second priciest stock on the consumer staples sub-index, trading at about 23 times profit.

The last time Moutai got this close to the 30-times-earnings multiple was in early 2018, before it got caught up in China’s bear market and a consumer slowdown that cost shareholders more than US$60 billion.

Moutai is still one of the most-loved stocks in China, with all but one of 40 analysts recommending buying the shares. Moutai’s rally has also underpinned the broader market, contributing the most to the Shanghai Composite Index this year. Bank of America Corp. joined eight other brokerages in predicting the shares will breach 1,000 yuan within 12 months.

“Moutai enjoys the strongest branding power, highest margins, best return-on-capital and strongest free cash flow in China’s baijiu industry, warranting a valuation premium over peers,” Citigroup Inc. analysts wrote.

Foreign investors are starting to retreat. They’ve sold a net 808 million yuan in the shares from Tuesday to Thursday last week, accounting for about 7 percent of their total selling for the entire A-share market. (SD-Agencies)