20220818-招银国际-华润啤酒-00291.HK-1H22_beat_on_better_cost_efficiency__our_top_pick_over_2H22_4页_1mb

CR Beer (291 HK) Company Update Summary

Core Content Overview

This report provides an update on CR Beer's (291 HK) performance for the first half of 2022 (1H22), along with financial forecasts and investment recommendations for the remainder of the year and beyond. CMB International Global Markets (CMBIGM) has upgraded its outlook for the company, highlighting its strong cost efficiency and positive trends in the beer market.

Key Financial Performance in 1H22

• Recurring EBIT reached RMB5.2bn, exceeding expectations by 17% YoY.
• Revenue grew by 7% YoY to RMB21bn, aligning with market expectations.
• Gross Margin (GPM) remained stable at 42.3% YoY.
• The improvement in recurring EBIT was primarily driven by a 3.4pp reduction in SG&A expenses, attributed to better operational efficiency and optimized resource allocation.
• Average Selling Price (ASP) increased by 7.7%, offsetting a 1% decline in shipment volume and helping stabilize GPM.

Management Highlights

1. Premium and sub-premium SKUs saw a 10% volume growth in 1H22, with Heineken contributing significantly (+30% YoY).
2. Sales volume recovery has been strong since June, fueled by the reopening of on-trade channels and a hot summer in China.
3. Snow Draft, SuperX, and Laoxue are highlighted as key brands for promotion in 2H22, expected to drive volume growth at a low single-digit (LSD) rate.
4. Management's outlook on the premiumization trend in China's beer market remains positive, with a slight reduction in expected raw material cost pressure to RMB1.2-1.3bn annually from RMB1.5-1.6bn.

Financial Forecasts (FY22E to FY24E)

Valuation and Target Price

• Target Price (TP) is set at HK$72.4, up 29.3% from the current price of HK$56.0.
• The new TP is based on a 27.0x EV/EBITDA multiple for mid-23E, which is +1 standard deviation (sd) above the mean since 2018.
• P/E for FY23E is 32.6x, and for FY24E is 28.7x.
• P/B for FY23E is 5.3x, and for FY24E is 4.8x.
• Dividend Yield is expected to rise to 1.4% in FY24E.

Investment Recommendation

• Rating: BUY (maintained)
• Reasoning: Despite a typically strong 1H22 contribution to full-year net income (85%+), the company's earnings risk for 2H22 is considered limited due to strong summer sales momentum.
• Earnings revision has led to an 8.4% and 8.9% increase in recurring EBIT and net income for FY22E and FY23E, respectively.

Shareholding and Financials

• Market Cap: HK$181,674 million
• Shareholding Structure:
  • CRH Beer: 51.7%
  • Morgan Stanley: 4.7%
  • HHLR: 4.1%

Stock Performance

Key Ratios

• Premium & Super Premium Sales Mix: Expected to rise from 23.3% in FY20A to 42.4% in FY24E.
• ROE: Improved from 12.8% in FY20A to 17.5% in FY24E.
• Net Debt to Equity: Maintained at Net Cash throughout the forecast period.
• Inventory Turnover Days: Increased to 120 days, which is considered normal during peak sales season.

Conclusion

CR Beer is positioned well for continued growth in the premiumization trend of China's beer market, supported by improved cost efficiency and strong sales recovery. The company's financial performance and valuation metrics suggest a positive outlook, with a BUY rating maintained. Investors are advised to consider the company's long-term potential and consult with financial advisors for tailored investment decisions.