20230303-招银国际-百威亚太-01876.HK-Down_to_HOLD__when_positives_of_the_recovery_trade_have_mostly_played_out_4页_1mb

Bud APAC (1876 HK) Summary

Core Content Overview

CMB International Global Markets (CMBIGM) has issued a company update on Bud APAC (1876 HK), downgrading its rating to HOLD. The report discusses the company's recent financial performance, market dynamics, and future outlook in the context of China's reopening and the broader F&B sector.

Key Financial Performance

• 4Q22 Results: The quarter's results were below expectations with a net loss of US$12mn and a revenue decline that was slightly deeper than anticipated.
• Sales Momentum: Despite the weak performance, the company's sales momentum has started to recover in January and extended into February, with a 20% volume growth for the month.
• Revenue Projections:
  • FY22E Revenue: US$6,478mn
  • FY23E Revenue: US$7,463mn (up 15.2% YoY)
  • FY24E Revenue: US$7,975mn (up 6.9% YoY)
• Net Income Projections:
  • FY22E Net Income: US$913mn
  • FY23E Net Income: US$1,267mn (up 38.7% YoY)
  • FY24E Net Income: US$1,362mn (up 7.5% YoY)
• Earnings Per Share (EPS):
  • FY22E EPS: US$0.07
  • FY23E EPS: US$0.10 (up 38.7% YoY)
  • FY24E EPS: US$0.10 (up 7.5% YoY)

Valuation and Target Price

• Target Price: HK$26.6 (down from HK$27.2)
• Current Price: HK$24.8
• Price Target Move: +7.3% from current price
• Valuation Metrics:
  • EV/EBITDA: 20.0x (unchanged), aligning with the 3-year average
  • P/E Ratio: 31.0x (FY24E)
  • P/B Ratio: 3.5x (FY24E)
  • Dividend Yield: 1.8% (FY24E)

Dividend and Corporate Governance

• Dividend Increase: Final dividend per share increased from 3.02 cents in 2021 to 3.78 cents in 2022, translating to a 54.7% payout ratio.
• Corporate Governance: Bud APAC is noted for its strong corporate governance and execution in the region, continuously riding on the consumer premiumization trend.

Key Risks and Upside Factors

• Upside Risks to HOLD Call:
  1. Stronger-than-expected sales recovery from nightlife channels in China
  2. Further price hike in 2023
  3. Value-accretive M&A activity
  4. Better-than-expected sales performance from regions outside China

Market and Sector Context

• China's Reopening: The company's performance is closely tied to the reopening trend in China, which has already been partially priced into the stock.
• Sector Performance: The broader F&B sector in China has seen a bull-run, but the catalysts for this recovery have largely been reflected in the stock price.
• Peer Comparison: Bud APAC is trading close to its 3-year average, while most of its F&B peers are still below this level.

Shareholding and Performance

• Shareholding Structure:
  • AB Inbev Brewing Co: 87.2%
  • JPMorgan Chase & Co: 0.9%
  • T Towe Price: 0.6%
• Share Performance:
  • 1-month: +0.8%
  • 3-month: +4.4%
  • 6-month: +11.2%

Financial Summary

• Cash Flow:
  • Net Cash from Operating Activities: US$2,015mn (FY23E)
  • Net Cash from Investing Activities: US$-560mn (FY23E)
  • Net Cash from Financing Activities: US$-500mn (FY23E)
  • Net Change in Cash: US$956mn (FY23E)
• Balance Sheet:
  • Total Net Assets (FY24E): US$12,373mn
  • Shareholders' Equity (FY24E): US$12,200mn
• Key Ratios:
  • ROE (FY24E): 11.34%
  • Current Ratio (FY24E): 1.0x
  • Inventory Turnover Days (FY24E): 52 days
  • Net Payable Days (FY24E): 219 days

Conclusion

Bud APAC's downgrade to HOLD reflects the maturing recovery trade and the limited incremental growth drivers. While the company shows strong corporate governance and has a solid foundation, the stock is trading close to its 3-year average, and the catalysts for the recovery have been largely priced in. Investors should monitor China's reopening progress and external growth drivers for potential upside.