Daiwa released a research report stating that it downgraded the rating of Tsingtao Brewery (00168) from 'buy' to 'hold' and lowered the H share target price by 24%, from 69 Hong Kong dollars to 52.6 Hong Kong dollars. Due to weak consumer willingness in China and the increasingly fierce competition of beer brands in the mid-to-high-end market segment, despite Tsingtao Brewery's investments in sales and marketing, Daiwa believes that the high-end transformation process of Tsingtao Brewery in 2025 will slow down, leading to a stagnant expansion of operating profit margin.
Daiwa stated that due to the strong performance of the Tsingtao Brewery brand, it predicts a 1% year-on-year increase in sales volume and average selling price in 2025. Daiwa also adjusted the group's earnings per share forecast for 2024-2026 by 3-11% to account for the weak factors of increasing sales volume and average selling prices. The bank noted that Tsingtao Brewery's sales performance in the third quarter of this year was lower compared to China Resources Beer (00291), with an expected low single-digit decrease in sales volume year-on-year for China Resources Beer. Due to China Resources Beer's strong brand portfolio and execution capabilities, Daiwa prefers China Resources Beer over Tsingtao Brewery.
