20210607-招银国际-华润啤酒-00291.HK-2025E_premiumization_target_lifted__raise_TP_to_HK_91.90_8页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This report provides an update on CR Beer (291 HK), highlighting the company's progress in premiumization, revised financial targets, and valuation metrics. It also includes insights into the broader China beer sector and relevant peer comparisons.

Key Updates and Targets

• 2025E Premiumization Target Lifted: The company has raised its premiumization volume target from 3.16mn kL to 4.0mn kL for 2025. The 5-year CAGR for sub-premium or above beer is now 22.3%, up from 16.7%.
• YTD Growth: The company has achieved 30%+ growth in sub-premium or above beer volume year-to-date.
• Target Price (TP) Raised: The TP has been increased from HK$81.00 to HK$91.90, based on a 50.4x FY22E P/E and a 2.3x FY22E PEG.
• Premium Segment Leadership: CR Beer aims to become the No.1 player in China's premium beer segment by 2025, both in terms of volume and market cap.
• Financial Performance: The company targets to reach the GPM level of the current market leader (38.4% vs 52.0% in FY20) by 2025.

Key Financial Highlights

• Revenue CAGR: Expected to grow at 11% from FY20 to FY23E.
• Adj. Net Profit CAGR: Expected to grow at 28% from FY20 to FY23E.
• Adj. EPS CAGR: Projected to increase by 21.9% from FY19 to FY23E.

Valuation Metrics

• Current Price: HK$71.00
• Target Price: HK$91.90 (+29% upside)
• P/E Ratio (FY22E): 49.2x
• P/B Ratio (FY22E): 7.7x
• Peg Ratio (FY22E): 1.8x, lower than international peers (e.g., Budweiser APAC: 4.6x).

Catalysts and Risks

Catalysts:

• Strong performance in sub-premium or above beer.
• Improved margins and revenue.
• Heineken's sponsorship of the European Cup and European Champions League is expected to boost sales in China.
• Wang Yibo's endorsement of Super X led to 1790% increase in first-day sales on Tmall Flagship Store.
• Marrsgreen and other premium brands are expected to grow in 2022E.

Risks:

• Cost pressures.
• Intense competition.
• Food safety issues.

Company Structure and Performance

• Shareholding:

  • CR Group: 31.24%
  • Heineken: 20.67%

• Share Performance:

  • 1-month: +9.6%
  • 3-months: +15.3%
  • 6-months: +8.1%

• Auditor: Ernst & Young

Peer Comparison

Strategic Moves and Brand Focus

• Premium Brands: Super X, Snow Draft, Heineiken, Marrsgreen, Lowen White Beer, Amstel.
• Brand Growth: Super X is the focus for 2021E, with a management target of almost double its sales volume.
• Endorsement Impact: Wang Yibo's endorsement of Super X has shown strong results, with 1790% increase in Tmall sales compared to 2020 Singles' Day.
• Heineken's Promotion: Leveraging European Cup and Champions League to boost sales in China.

Financial Summary Highlights

• EBIT Growth: Expected to grow from 5,587 RMB mn (FY19A) to 8,206 RMB mn (FY23E).
• Gross Margin: Projected to increase from 40.9% (FY19A) to 44.8% (FY23E).
• EBIT Margin: Expected to rise from 15.5% (FY19A) to 19.2% (FY23E).
• Adj. Net Margin: Projected to increase from 11.5% (FY19A) to 14.6% (FY23E).
• Net Cash: Expected to grow significantly, from 1,897 RMB mn (FY19A) to 16,899 RMB mn (FY23E).

Key Ratios

CMBIS Ratings

• BUY: Stock with potential return of over 15% over the next 12 months.
• HOLD: Stock with potential return of +15% to -10%.
• SELL: Stock with potential loss of over 10%.
• NOT RATED: Stock not rated.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in line with the market.
• UNDERPERFORM: Industry expected to underperform the market.

Analyst Certification

• The primary analyst certifies that the views expressed accurately reflect their personal opinions.
• No compensation is directly or indirectly related to the specific views in this report.
• Analyst and associates have not traded the stocks covered in the last 30 days, and will not trade them for 3 business days after the report's release.

Important Disclosures

• The report is not investment advice.
• Past performance does not indicate future results.
• The value of investments is uncertain and may fluctuate.
• CMBIS is not a registered broker-dealer in the U.S. or U.K. and may have conflicts of interest.

Conclusion

CR Beer is optimistic about its premiumization strategy, with strong growth in sub-premium or above beer and positive momentum from brand endorsements and sports sponsorships. The target price has been increased to HK$91.90, reflecting improved financial forecasts and valuation metrics. Despite positive outlook, the company faces risks including cost pressures and intense competition. The BUY rating is maintained, with a 29% upside potential from current price.