20230117-招银国际-华润啤酒-00291.HK-Another_positive_year_for_2023__our_preferred_pick_for_China_s_re-opening_4页_1mb

CR Beer (291 HK) Summary

Core Content Overview

CR Beer (291 HK) is a leading player in China's beer market, with a positive outlook for 2023 as the country continues its re-opening. The company is a wholly owned subsidiary of China Merchants Bank, and its performance is closely monitored by CMB International Global Markets (CMBIGM), which maintains a BUY rating with a target price of HK$77.4, representing a +27.6% upside from the current price of HK$60.6.

Key Financial Highlights

Revenue and Growth

• FY20A: RMB 31,448 million
• FY21A: RMB 33,387 million (+6.2% YoY)
• FY22E: RMB 35,617 million (+6.7% YoY)
• FY23E: RMB 38,825 million (+9.0% YoY)
• FY24E: RMB 42,619 million (+9.8% YoY)

Net Income and Earnings Per Share (EPS)

• FY20A: RMB 2,094 million
• FY21A: RMB 4,587 million (+37.0% YoY)
• FY22E: RMB 4,299 million (+20.0% YoY)
• FY23E: RMB 5,024 million (+16.9% YoY)
• FY24E: RMB 5,736 million (+14.2% YoY)
• EPS (FY20A-FY24E): RMB 0.8, 1.1, 1.3, 1.5, 1.8 respectively

Earnings Per Share (Recurring)

• FY20A: RMB 0.8
• FY21A: RMB 1.1
• FY22E: RMB 1.3
• FY23E: RMB 1.5
• FY24E: RMB 1.8

Valuation Metrics

• P/E (2023E): 32.6x (down from 27.0x in previous estimates)
• P/B (2023E): 5.7x
• Dividend Yield (2023E): 1.2%
• ROE (2023E): 18.5%
• ROA (2023E): 9.7%

Main Business Segments

• Premium/Sub-premium:

  • FY20A: RMB 7,330 million
  • FY21A: RMB 9,585 million (+28.7% YoY)
  • FY22E: RMB 10,819 million (+13.1% YoY)
  • FY23E: RMB 13,151 million (+21.5% YoY)
  • FY24E: RMB 16,473 million (+25.3% YoY)
  • Sales mix (2023E): 33.9%

• Mainstream:

  • FY20A: RMB 24,118 million
  • FY21A: RMB 23,802 million (-1.3% YoY)
  • FY22E: RMB 24,797 million (+4.1% YoY)
  • FY23E: RMB 25,674 million (+3.5% YoY)
  • FY24E: RMB 26,146 million (+1.8% YoY)
  • Sales mix (2023E): 66.1%

Performance Drivers

• Premium/Sub-premium Growth: Outperformed group average at ~10% in 2H22, driven by Heineken's influence.
• ASP (Average Selling Price) Increase: Management expects a YoY increase in MSD (Mid-Size Domestic) to HSD (High-Size Domestic) ASP due to regional price hikes and product mix upgrades.
• Cost Pressure: Input cost pressure eased in 2023 compared to 2022, with a ~RMB500mn increase vs RMB1bn+ in 2022.
• SG&A Costs: Continued to decline in 2H22 but at a slower pace due to capacity optimization expenses.

Earnings Revision and Financial Outlook

• Earnings Revision (2022E-2024E):
  • Revenue: Increased by 3.2%, 6.6%, and 8.6% respectively.
  • Gross Profit: Increased by 3.2%, 7.5%, and 9.1% respectively.
  • Net Profit: Increased by 2.6%, 8.1%, and 8.9% respectively.
• Gross Margin: Expected to rise to 40.6% in FY24E.
• EBIT Margin: Projected to increase to 17.7% in FY24E.
• Net Margin: Projected to increase to 13.5% in FY24E.

Capacity Optimization and Operational Efficiency

• SG&A Decline: Continued in 2H22, but at a slower pace due to capacity optimization expenses.
• Opex Ratio: Expected to continue declining as the company optimizes production structure and focuses on premium SKUs.
• Capacity Optimization: Ongoing within 2023, with further exercises planned.

Baijiu Business

• Jinsha: Fully consolidated on 10 Jan, with financial impact muted.
• Long-term Growth: Expected to expand over the next 3-5 years, with significant results anticipated around 2028.

Share Performance and Market Position

• 1-month return: 11.9%
• 3-month return: 18.8%
• 6-month return: 15.4%
• Relative to market: 1.2%, -8.8%, 9.5% for 1-month, 3-month, and 6-month periods respectively.
• Market Cap (HK$ mn): 195,948
• Shareholding Structure:
  • CRH Beer: 51.7%
  • Morgan Stanley: 4.7%
  • HHLR: 4.1%

Risk and Disclaimer

• Investment Risks: CMBIGM does not provide individually tailored investment advice and the report is not an offer or solicitation to buy or sell any security.
• Conflict of Interest: CMBIGM may have investment banking relationships with the companies mentioned, which could affect the objectivity of the report.
• Legal Responsibility: The report is for the use of intended recipients only and may not be reproduced, reprinted, sold, redistributed, or published without prior written consent.

CMBIGM Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months
• NOT RATED: Stock is not rated by CMBIGM

Industry Outlook

• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Conclusion

CR Beer is positioned to benefit from the re-opening of China's economy, with a strong focus on premium and sub-premium products. The company's financial performance has shown improvement, driven by cost efficiency and strategic adjustments. Despite some challenges in the fourth quarter of 2022, the outlook for 2023 is positive, with revenue and net profit expected to grow. CMBIGM's updated target price reflects confidence in the company's future performance, and the BUY rating underscores its potential for significant returns. The baijiu business, although not yet showing substantial financial impact, is expected to grow over the next few years.