Jinwu Financial News | According to Haitong International Development Research Report, China Resources Beer (00291) 24H1 achieved revenue/net profit of 23.74/4.7 billion yuan, -0.5%/+1.2% year-on-year. Due to the high base and negative effects of the weather, the beer business achieved revenue of 22.57 billion yuan, -1.4% YoY, and -3.4%/+2.0% YoY in sales/tonnage. The volume and price performance were superior to the industry average. Benefiting from the improved product structure and reduced costs of some packaging materials, the gross margin of the beer business increased by 0.6 pct to 45.8%. In terms of liquor, through measures such as summary renewal, stock price reduction, and organizational restructuring, the liquor business achieved revenue of 1.18 billion yuan in the first half of the year, +20.6% over the same period, driving a 2.1 pct increase in gross margin to 67.6%. Net cash inflows from operating activities increased 25.6% year-on-year during the reporting period. The company paid an interim dividend of 0.373 yuan/share, an increase of 30% over the previous year, and the semi-annual dividend rate increased from 20.1% to 25.7%.

The bank said that since the Politburo meeting was held on September 26, macroeconomic policy packages have been introduced one after another. As subsequent policies to promote consumption and expand domestic demand gradually gain strength, domestic consumption may usher in an accelerated recovery. According to the bank's statistics, as of the end of October, the historical PE quartile of the H share essential consumer industry was 1% (15.1x) since 2011, of which the PE fraction for alcoholic beverages was 2% (16.6x) since 2011. The bank believes that improved domestic economic expectations and improved liquidity brought about by the US dollar interest rate cut cycle will further increase the valuation of H shares. China Resources Brewery, as the leader in the beer industry and the only “beer+liquor” two-wheel drive target, is expected to be the first to benefit from the sector's valuation repair.

According to the bank, the company already ranked first in the country in terms of beer sales, revenue, and profit in 2023. Although industry demand continued to be under pressure in the second and third quarter of this year, the company's volume and price resilience and high-end pace were superior to the industry average, reflecting a solid brand foundation and strong operational capabilities. The fourth quarter base was low. The National Day holiday dining data sent a signal that fresh drinking channels were stabilizing, and the decline in costs also brought certainty to performance. In terms of liquor, the company has completed the first phase of “exploration” and entered the second stage of “development”. It is expected that the next two years will usher in rapid growth. Based on analysis from various perspectives such as performance, valuation, and dividends, the company's stock price already has a high margin of safety. The bank expects the company's 24-26 EPS to be 1.64/1.83/1.96 (previous value was $1.87/2.14/2.42), giving 24 years of 27xPE (unchanged). The target price was lowered from 56 to HK$48, maintaining the “superior to market” rating.