20220922-招银国际-青岛啤酒股份-00168.HK-A_potentially_strong_3Q,_when_our_channel_checks_indicated_low-teen_sales_growth_for_Jul_-Sep_5页_1mb

Tsingtao Brewery (168 HK) Summary

Core Content

Tsingtao Brewery (168 HK) is a leading Chinese beer company with a strong presence in the consumer staples sector. The report provides an analysis of its performance, financial outlook, and valuation as of the latest update.

Key Financial Highlights

1H22 Performance

• Top-line growth: 5% (slower than CRB's 7%)
• ASP growth: Better-than-expected, though slower than anticipated
• Gross Margin (GPM): 41%, well supported due to cost mitigation
• Earnings Per Share (EPS): 2.48 (HSD above consensus)

3Q22 Outlook

• Sales growth: Likely to be in the low-teen range (10%)
• Drivers: Hot weather and mid-autumn festival demand for canned products
• Channel checks: Positive signs for 3Q performance

2H22 Outlook

• GPM: Expected to benchmark healthily to 2H20 levels
• Input costs: Unlikely to be fully mitigated, but comp is low and input prices are easing
• Promotional efforts: Disciplined in Jul-Aug, contributing to solid performance
• Selling expenses: On the rise due to increased summer promotion

Financial Projections (FY20A - FY24E)

Earnings and Valuation

• Earnings assumptions: Little changed for 2022/23E
• Target Price (TP): HK$89.90 (up 23.2% from current price of HK$72.95)
• Valuation multiple: 15.0x roll-forward mid-23EV/EBITDA, which is +1 sd above long-term average since 2018

Share Performance

Shareholding Structure

• Tsingtao Beer Group Co.: 32.5%
• China Securities Finance Co.: 1.2%

Analyst Recommendations

• Rating: BUY (Maintain)
• Target Price: HK$89.90
• Reasoning: Strong 3Q performance, continued mix upgrade, and disciplined promotional efforts in 2H22

Earnings Revision Comparison

Key Observations

• The company is benefiting from premiumization and mix upgrades, especially in the first half of the year.
• Consumption rotation from baijiu to beer is occurring due to a shift in spending habits, particularly in social gatherings.
• Input cost pressures are still present but are being managed through a relatively easy comp and a declining trend in input prices.
• Selling expenses have increased, indicating a focus on summer promotions.
• The P/E ratio is expected to decline over the next few years, suggesting a potential valuation discount.

Industry Context

• The beer industry is expected to outperform the broader market benchmark over the next 12 months.
• Tsingtao is considered a top pick due to its premiumization efforts and cost efficiency.

Risks and Disclosures

• The report includes important disclosures regarding the potential risks involved in investing in the securities mentioned.
• CMBIGM is not liable for any loss or damage arising from reliance on the report.
• The report is not investment advice and is intended solely for informational purposes.
• It is not suitable for all investors and should be used with caution.

Conclusion

Tsingtao Brewery is showing positive momentum in its performance, particularly in the 3Q and 2H22, driven by festive demand, premiumization, and mix upgrades. While input costs remain a concern, the relatively easy comp and disciplined promotional efforts are expected to support solid financial performance. The BUY rating is maintained, with a target price that reflects a positive outlook for the stock over the next year. Investors are advised to consult with a financial advisor before making any investment decisions.