Incident: The company released its 2023 annual report. According to the company announcement, in 2023, the company achieved operating income of 6.856 billion US dollars, an increase of 11.1% over the previous year (endogenous growth caliber), a net profit of 852 million US dollars, a year-on-year decrease of 7%, after deducting non-net profit of 832 million US dollars, an increase of 5.45% year on year.
2023Q4 achieved operating revenue of US$1,293 million, up 8.9% year on year (endogenous growth caliber), net profit of -US$23 million to mother, -US$0.12 billion in 22Q4, net profit of -US$48 million, and US$144 million in 22Q4. The company's 2023 dividend was 5.29 cents per share, with a payout ratio of 82%. The company's performance is in line with market expectations.
Investment analysis opinion: Considering that there is still some pressure on the Korean regional business and intense competition, the 2024-2025 profit forecast was lowered, and the 2026 profit forecast was added, and the company's net profit to the mother for 2024-2026 was US$10.28/11.65/1.293 billion (the previous forecast net profit for 2024-2025 was US$1.28/1.38 billion), up 21%/13%/11% year-on-year respectively. The company's latest closing price corresponds to 2024-2026 PE 17/15/ 14X We believe that Budweiser Asia Pacific, as a leading high-end company, has broad scope for high-end upgrades in the Chinese market with a high-end product matrix, bringing about a steady increase in profitability. At the same time, it has considerable potential for growth in the Indian market and maintains a “gain” rating.
The upgrading of the market structure in the western Asia-Pacific region has led to an increase in the price of tonnes of alcohol. According to the company's announcement, in 2023, the company achieved sales volume of 9.2767 million tons of beer, an increase of 4.6% over the previous year (endogenous growth caliber, same below), and revenue per ton of alcohol was 739 US dollars/ton, an increase of 6.2% over the previous year. 23Q4 achieved sales of 1.5667 million tons of beer, a year-on-year decrease of 2.1%, and revenue per ton of alcohol of 825 US dollars/ton, an increase of 11.2% over the previous year. Budweiser's structural improvement in 23 was mainly due to growth in the western Asia Pacific region. In 2023, the West/East Asia Pacific region achieved beer sales of 812.28/1.153,900 tons, +5.3%/-0.3% year-on-year, and revenue per ton of alcohol was 691.02/1077.22 US dollars/ton, +7.7%/+1.5% year-on-year.
The structure of the Chinese market continues to upgrade. According to the company's announcement, sales volume in the Chinese market increased 4.3% year on year in 2023, and is expected to reach 7.37 million tons, increasing the market share by 69 basis points. Among them, revenue from high-end and ultra-high-end products all achieved double-digit growth, and the total sales volume of products such as Budweiser Gold and Black Gold exceeded 100,000 tons. Strong structural upgrades led to an 8.1% year-on-year increase in the Chinese market's revenue per ton of alcohol. 2023Q4 was affected by weak consumer confidence, and sales in the Chinese market fell 3.1% year on year. Among them, sales pressure on mid- and low-end beer was even greater, while Budweiser and ultra-high-end products achieved double-digit growth through regional expansion and the recovery of high-end beer channels such as nightclubs, which led to a 14.7% year-on-year increase in revenue for tons of alcohol. In 2023, Budweiser's distribution cities in China reached 220, and the number of distribution cities for its ultra-high-end product portfolio reached 63. Looking ahead to 2024, sales are expected to be under pressure in Q1 due to base pressure and insufficient external consumer confidence. However, on the one hand, we believe that the trend of high-end beer upgrading is still strong in the external environment. On the other hand, the company continues to expand channels and increase distribution cities for high-end brands, and the growth of the company's highest/ultra-high-end beer is still resilient.
Competition is intensifying in the Korean market. According to the company's announcement, due to the return of Japanese brands to the market in 2023, under a high sales base, the company's sales volume in the Korean market remained roughly flat, while its market share fell by 150 basis points. The single-digit decline in sales volume in 23Q4. The revenue side benefited from the company's 6.9% price increase for core categories in October 2023, and the increase in revenue per ton of wine led to a low single-digit increase in revenue. Looking ahead to 2024, considering that in the face of increased competition, price increases will further affect the sales performance of the Korean market, compounded by the high base of 23Q1, it is expected that sales in the Korean market will remain under pressure.
In 2023, Budweiser Asia Pacific's EBITDA was US$2,023 million, up 4.7% year on year, and EBITDA Margin was 29.5%, down 0.3 pct year on year (reported caliber). By region, the 2023 EBITDA margin for West/Eastern Asia Pacific was 30.3%/26%, respectively, +0.3/-3.2pct. The decline in profit margins in the Eastern Asia Pacific region was mainly due to increased commercial investment in South Korea, while the Asia-Pacific West mainly benefited from the strong performance of the high-end Chinese market.
Risk warning: Competition in the high-end market has intensified, costs have risen sharply, and there is a risk of exchange rate changes.