Budweiser APAC (1876 HK) 2Q Summary and Analysis
Core Content Overview
Budweiser APAC (1876 HK) reported its 2Q results, which were largely in line with expectations. Despite a challenging operational environment, particularly in China due to lockdowns, the company managed to deliver solid performance through premiumization efforts. The report also includes financial forecasts, valuation metrics, and analyst ratings.
Main Points
2Q Performance
- Normalized EBITDA: US$569mn, down 5.6% YoY.
- Revenue: US$1.8bn, down 5% YoY.
- Volume Decline in China: 6.5% in 2Q, contributing to a 13.7% organic EBITDA decline.
- ASP Growth: Continued growth in average selling price (ASP) supported by premiumization.
- Non-Covid Areas: Super-premium/premium SKUs showed double-digit growth in June.
- 2H Outlook for China: Expected volume recovery to positive LSD growth with a steady 2‰+ ASP increase.
- FY Revenue Forecast: Flattish YoY growth for the region.
- Normalized EBITDA Margin: Slightly lower at 35-36%.
Regional Performance
China
- Volumes and revenue declined by 5.5% and 3.2% in 1H22.
- Channel disruptions and geographic mix issues were key factors.
- Conditions improved MoM, with volume recovery in June.
- ASP grew by 2.4% YoY.
- Management expects continued growth in 2H22.
South Korea
- Continued improvement in performance.
- Outperformed the industry in both on-premise and in-home channels.
- Achieved solid total market share gains in 1H22.
- Revenue, volume, and EBITDA grew by DD, HSD, and strong DD in 2Q22.
- ASP increased by HSD, supported by a 7.7% price increase in core brands like Cass and HANMAC.
- Strong margin expansion observed.
India
- Industry volumes recovered to above pre-pandemic levels in 1H22.
- Budweiser achieved strong revenue and EBITDA growth.
- Premium and super-premium volumes doubled YoY (on a low base).
- Management expects strong momentum to continue, driven by demographic advantage and a growing middle class.
Earnings Summary
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (US$ mn) |
5,588.0 |
6,788.0 |
7,127.8 |
7,902.9 |
8,543.5 |
| YoY growth (%) |
-14.6% |
21.5% |
5.0% |
10.9% |
8.1% |
| Net profit (US$ mn) |
514.0 |
950.0 |
1,154.5 |
1,332.9 |
1,478.8 |
| EPS (Reported) (US$) |
0.04 |
0.07 |
0.09 |
0.10 |
0.11 |
| YoY growth (%) |
-48.1% |
84.8% |
21.5% |
15.5% |
10.9% |
| Consensus EPS (US$) |
n.a. |
n.a. |
0.08 |
0.10 |
0.11 |
| P/E (x) |
n.a. |
n.a. |
34.0 |
29.4 |
26.5 |
| P/B (x) |
n.a. |
n.a. |
3.3 |
3.1 |
2.9 |
Earnings Revision (US$ mn)
| Metric |
New FY22E |
New FY23E |
New FY24E |
Old FY22E |
Old FY23E |
Old FY24E |
Diff (%) |
| Revenue |
7,128 |
7,903 |
8,544 |
7,372 |
8,156 |
8,720 |
-3.3% |
| Normalized EBITDA |
2,340 |
2,599 |
2,853 |
2,358 |
2,679 |
2,887 |
-0.8% |
| Net profit (reported) |
1,154 |
1,333 |
1,479 |
1,062 |
1,279 |
1,467 |
8.8% |
| EPS (US$) |
0.09 |
0.10 |
0.11 |
0.08 |
0.10 |
0.11 |
9.2% |
| Normalized EBITDA Margin |
32.8% |
32.9% |
33.4% |
n.a. |
n.a. |
n.a. |
- |
| Net Margin (reported) |
16.2% |
16.9% |
17.3% |
14.9% |
16.4% |
17.4% |
1.3ppt |
Analyst Ratings and Target Price
- Rating: BUY (Maintain)
- Target Price (HK$): 28.40 (Previous: 28.00)
- Up/Downside: 21.9%
- Current Price (HK$): 23.30
Financial Highlights
Revenue Growth (YoY)
| Year |
Growth (%) |
| FY20A |
-14.6% |
| FY21A |
21.5% |
| FY22E |
5.0% |
| FY23E |
10.9% |
| FY24E |
8.1% |
EBITDA Margin
| Year |
Margin (%) |
| FY20A |
32.4% |
| FY21A |
28.3% |
| FY22E |
32.8% |
| FY23E |
32.9% |
| FY24E |
33.4% |
Net Margin (Reported)
| Year |
Margin (%) |
| FY20A |
16.2% |
| FY21A |
16.9% |
| FY22E |
17.3% |
| FY23E |
16.4% |
| FY24E |
17.4% |
Valuation Metrics
| Metric |
2022E |
2023E |
2024E |
| P/E |
34.0 |
29.4 |
26.5 |
| P/B |
3.3 |
3.1 |
2.9 |
Share Performance
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
4.0 |
11.9 |
| 3-mth |
16.5 |
12.4 |
| 6-mth |
7.9 |
28.7 |
Shareholding Structure
| Holder |
Percentage (%) |
| AB InBev Brewing Co APAC Ltd |
87.2 |
| JPMorgan Chase & Co |
1.0 |
Key Financial Ratios
| Ratio |
2022E |
2023E |
2024E |
| Current Ratio (x) |
0.9 |
1.1 |
1.3 |
| Receivable Turnover Days |
22.2 |
22.2 |
22.2 |
| Inventory Turnover Days |
55.0 |
52.0 |
52.0 |
| Payable Turnover Days |
240.0 |
240.0 |
240.0 |
Summary of Key Information
- Performance: 2Q results were in line with estimates, with strong premiumization efforts offsetting volume headwinds.
- China: Volume and revenue declined, but recovery is expected in 2H22 with ASP growth.
- South Korea: Strong performance with market share gains and margin expansion.
- India: Strong revenue and EBITDA growth due to demographic and market factors.
- Valuation: New target price of HK$28.40 based on a revised 20.0x EV/EBITDA multiple.
- Analyst Outlook: BUY rating maintained with positive growth expectations.
Disclaimer
This report is for informational purposes only and does not constitute investment advice. The information is based on publicly available data and is subject to change. Investors are advised to conduct their own research and consult with a financial advisor before making investment decisions.
