中国啤酒行业：2024年第三季度总结，残酷的夏天

EquitiesBeverages 3Q24wrap-up:Cruelsummer China 3Q24atoughquarterondisappointingvolumes Katharine Song* (Reg. No. S1700517120001)Head of A-share Consumer ResearchHSBCQianhai SecuritiesLimitedkathy.l.h.song@hsbcqh.com.cn+862150662007 + 2025: easing volume pressure and likely commodity tailwinds BuyTsingtaoA/Hand Yanjing;lowertargetpriceforBudAPACtoHKD9.10(fromHKD10.40) Eric Liu* (Reg. No. S1700123040003)AssociateShenzhen 3Q volumes of our covered names down 6.2% y-o-y on average, despite an easybase. We believe this was the result of persistent challenges in on-premiseconsumption as consumers cut back on dining out. We think they have graduallydeveloped a preference for drinking at home this year. Given current trends in thebeer industry, the mainstream segment (priced at RMB8-10) has the most resilientvolume growth momentum, benefiting from a shiftin demand from both the premiumsegment (RMB10+) and the economy segment (below RMB4). Looking ahead, wemaintain our view that brewers with more exposure to the mass market are likely tostructural mix upgrade opportunities. * Employed by a non-US affliate of HSBC Securities (USA) Inc, and isnot registered/qualified pursuant to FINRA regulations 2025 - easing pressure ahead, Given limited volumes expected during the off-seasonin 4Q, we expect most brewers to prioritize channel destocking. With cost tailwindsand a disciplined approach to expense management in 4Q, we expect losses tonarrow y-o-y. Looking ahead to 2025, we think most brewers stand to benefit fromeasing volume pressure, with the volume recovery to accelerate in 2H25e from a lowbase (two consecutive years of meaningful volume declines in 2H23 and 2H24e). Interms of costs (see Exhibit 9-12), despite some pressure from aluminium, the pricesa result of their hedging policies (details on page 5). We expect the pace of therecovery of on-premise consumption to accelerate, underpinned by governmentpolicies, which should drive product mix optimization and AsP recovery. Lack of catalysts in the near term; undemanding valuation. With share pricesdown 8% y-t-d, China's beer sector currently trades at a 16.3x 12 month forward PEat its trough level (Exhibit 8). This prices in the 3Q earnings pressure, in our view. Weroll over our valuation base year from 2024 to 2025 for Bud APAC and ChongqingBrewery (CBC). Given the weaker volume growth, we lower our 2024-26 earningsestimates for both Bud APAC (TP lowered to HKD9.10) and CBC (TP unchanged atRMB60.00) to reflect the soft demand in the on-premise channel. We maintain ourestimates and TPs for Tsingtao A/H (3Q results) and Yanjing (3Q results) We preferTsingtao Brewery-A/H (Buy), given its higher sales exposure to the mass market ina sluggish consumption environment and higher dividend yield. See the companysectionsforvaluationandrisks HSBCAsiaInvestorForum 12-13November 2024|Lotte NewYork Palace Register Issuerof report:HSBCQianhai Securities Limited Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Qianhai Securities at:https://www.research.hsbc.com Net profit estimates (m) Cruel summer 3Q24volume weakness weighed on earnings growthDespiteslowerpaceofmixupgrades,GPMstillheldupwell,helpedby cost tailwindsWeroll overourvaluation baseyear from2024 to2025and lower2024-26eearningsgrowthassumptions;lowerTPforBudAPACandmaintainourTPforCBC China beer industry Exhibit 3.China beer industry: 3Q results review Source: Company data,HSBC Qianhai Securities estimatesNote:APAC West only for Budweiser Source:Companydata,HSBCQianhaiSecuritiesestimates Source: Company data, HSBC Qianhai Securities estimatesNote: APAC West only for Budweiser Rawmaterialprices Heading into 4Q24, we have observed that most commodity prices have continued to decline.As most brewers are likely to lock in the price for major raw materials around end-2024 or early2025, we expect our covered beer names to benefit from cost tailwinds, resulting in a decreasein the cost per ton.ta Source:National Bureauof Statistics (NBS),HSBC Qianhai Securities SuratalBuracsSQihaur Company updates BudweiserBrewingAPAC 1876 HK, CMP HKD7.97, TP HKD9.10, Hold3Q24 a mixed bag: Strength in South Korea and India versus softness in China China's organic net revenue was down 16% y-o-y in 3Q24, mainly dragged by volume declineof 14% (underperforming mid-single digit volume decline for industry volume in 3Q as per NBSdue mainly to a higher sales exposure to on-premise channels). By segment, Bud's core++ASP growth sequentially improved to -2% y-0-y in 3Q from -5% y-0-y in 2Q despite a high base(8.9% y-o-y in 3Q24). We think the improvement was mainly driven by continued product mixupgrades at the in-home channel, with the volume of premium and super premium up mid-singledigit y-o-y in 9M24, according to the results briefing. In South Korea, the organic revenue was up m