This undated photo shows bottles of Moutai baijiu at the distiller's factory. (QILAI SHEN / BLOOMBERG)

Liquor giant Kweichow Moutai Co said its net income rose 13 percent in the first half of 2020 as the recovering local economy boosted demand for its ultra-premium line of baijiu, China’s national drink, although growth has not yet returned to pre-pandemic levels.

Kweichow Moutai Co has shown exceptional resilience in the past few years, making it an investor darling and China’s biggest stock

Earnings for the first six months was 22.6 billion yuan (US$3.2 billion), the company said in a statement to the Shanghai stock exchange on Tuesday. Revenue for the period jumped 11 percent to 45.6 billion yuan. For the comparable period last year, it had reported a 26 percent rise in net income and 17 percent rise in revenue. 

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Moutai has shown exceptional resilience in the past few years, making it an investor darling and China’s biggest stock. Demand for its fiery baijiu -- scarce in supply and highly coveted by the Chinese elite -- has survived a local economic slowdown, US-China trade tensions, and more recently, the coronavirus pandemic.

The baijiu maker saw buoyant first quarter earnings when the virus was spreading in China during that period, forcing the government to impose strict social distancing measures including a lockdown in some places and a ban on all public gatherings.

Baijiu bribes

There are signs, however, that the liquor maker may be facing pressure over its high prices. Moutai saw a record US$25 billion wipe out in its market valuation on July 16 after the influential state-run publication, People’s Daily, took aim at at its price tag, saying that the alcohol is often used in corruption cases.

Shares advanced almost 3 percent on Tuesday, taking this year’s rise to 41 percent. It touched a record high of 1781.99 yuan on July 13.

The distiller, which makes baijiu out of sorghum and wheat, could see demand weaken in the usually buoyant autumn months if Chinese consumers shun socializing amid resurgences of the coronavirus outbreak.

China’s new cases of infection this week were the most in over four months as the country battles outbreaks in its northeastern and western regions.

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Demand for ultra-premium baijiu is down as much as 40 percent from a year ago with very few banquets being hosted during the wedding season and the annual dragon boat festival, a Bernstein note said on July 24, citing major distributors of Moutai and Wuliangye Yibin Co Ltd.

Earlier this year before the pandemic, the Chinese alcohol giant gave guidance of about 10 percent growth for full-year sales for 2020 -- its weakest growth in five years.