It is predicted that 4Q22's EBITDA will decline by double digits compared with the same period last year.
We estimate that 4Q22 revenue in China is down 10-15% from the same period last year. EBITDA is down more than 30% from the same period last year; revenue growth in South Korea is high in double digits, while EBITDA growth is slightly lower than revenue growth. Overall, we expect 4Q22 revenue to decline in the middle to high digits year-on-year, and EBITDA to decline in double digits.
Pay attention to the main points
Due to the rapid development of the 4Q22 epidemic in various parts of the Chinese market, both volume and price have fallen, and profits fluctuate greatly in a single quarter. Due to the traditional off-season of beer in winter, the impact of local outbreaks in the early stage of 4Q22 led to a year-on-year decline in overall sales of nearly double digits (basically the same as the industry). At the same time, due to the further decline in the openness of high-end entertainment venues under the influence of the epidemic, the company's sales of high-end ultra-high-end products are under pressure. superimposed on the high base caused by the Spring Festival in the same period last year, we estimate that the number of units in the decline in ASP in a single quarter, and the overall revenue dropped by 10-15% compared with the same period last year. However, due to rising costs and some fixed expenses, we estimate that EBITDA fell by more than 30 per cent year-on-year.
The rising momentum of both volume and price in the South Korean market is making efforts to grab share. The overall consumption situation of Korean beer continues to improve rapidly, and we estimate that 4Q22 sales increased by 9%, basically continuing the momentum of sales growth in the previous few months. At the same time, the 7.7% price increase of all products at the beginning of last year is still fully reflected in the single quarterly report end, and we estimate that 4Q22's ASP increased by about 8%, resulting in nearly 20% increase in revenue. However, due to rising costs and the company's current strategy of giving priority to market share in the Korean market, the company's market investment continues to increase, resulting in high sales costs, we estimate that EBITDA growth is slightly lower than revenue growth. But we believe that the company's policy of increasing investment has helped the company gain a significant share of its main competitors.
Looking forward to 2023: on the cost side, we expect that the continued rise in the price of raw materials such as barley may lead to a trend increase in overall cost prices, but the increase may be significantly less than 2022; sales in China, especially high-end ultra-high-end sales, may be more significantly higher in the 2Q23 and later due to the opening of high-end current drinking channels, superimposed by last year's low base, the revenue side may have a more significant increase. With reference to the progress of South Korea's recovery, we believe that follow-up companies may also increase market investment in China with share as the first, leading the industry to improve the competitive environment.
Profit forecast and valuation
We keep our annual profit forecast for 2022-23-24 unchanged, and our annual revenue in 2022-23-24 is 7.6% year-on-year, respectively, compared with the same period last year, and the revenue in 2022-23-24 is 7.6% compared with the same period last year. The current stock price corresponds to the 17.5/14.8x2023/24 annual EV/EBITDA. We maintain an outperform industry rating and target price of HK $27, corresponding to 18.7/15.8x2023/24 's annual EV/EBITDA, which is 6.9% upside from the current share price.
Risk.
The impact of the epidemic on sales exceeded expectations, high-end competition intensified, raw material prices rose higher than expected, and food safety.