Really need your helps on this valuation mystery of liquor company

Hi everyone,

Considering the high-quality of opinions here, I really want to post an evualition question that confused me recently.

Now I am trading Chinese stocks, and now comes the bear market (a 60% drop in 4 months). The P/E ratio is around 25.

However, Kweichou Moutai, the inventor of soy-fragranced liquor and the most prestigious Chinese liquor manufacturer, is trading at 180 RMB a share, or still 45 P/E to the 2008 estimated EPS of 4.00 RMB. The net asset now is 10 RMB a share, so the P/B is 18 times.

Here comes the problem. Goldman, UBS, and CICC reiterated in their reports that the 2008 target price reflecting the true value of the company should be more than 250 RMB per share, or 25 times P/B ratio. Fund managers were buying like crazy when the bull market came. Now they hold 65% of the tradable shares, and it seems that they have no intention to sell it while other stocks are plunging.

Well, though I admit Moutai is a fantastic company, for its strong brand in the indsutry and high gross margin (85%), and probably a sustainable ROE at 30%, I really doubt that as investors if we should buy a company trading at such a high P/B ratio.

I mean, when you buy an asset 25 times of its book value, a 30% growth on one single share is really nothing. Even if Moutai's dividend of 2008 is to be 2 RMB per share, 50% of its EPS, the return is tiny if you buy the stock for 180 RMB at this point, not to mention 250 RMB.

Yes, I know capital gain could be important; and the intangible value of brand could matter. But still, for a company producing liquor instead of some high tech stuff, come on, 25 times P/B? How we gonna profit from this?