The Zhitong Finance App learned that Guoxin Securities published an in-depth research report on the beer industry. The team believes that seizing the dividends of high-end development in the industry and attaches importance to the value of beer faucet allocation. The future direction of high-end development of the beer industry is clear, and beer leaders will continue to improve their profitability, which in turn will drive rapid profit growth and further increase ROE. Steady profit growth and abundant cash have created conditions for beer companies to implement high dividend policies. It is expected that the dividend ratio of some beer brewers will steadily increase in the future, which will further enhance the allocation value of beer faucets. The current valuation of the beer sector has fallen back to a historical low, and the sector has ushered in a good layout opportunity.

The following is a core summary of the research report:

Review and outlook: Product structure upgrades have become the main growth tool, and the trend of high-end industry will continue in the future. The production and sales volume of China's beer industry peaked in 2013, marking the transition to a period of competitive stock in the Chinese beer market. Under the leadership of leading companies, the beer industry entered a period of high-end development around 2017. Increased average prices became the core driving force for the scale growth of the industry, and product structure upgrading was the main tool. Under the combined effects of increased average prices and cost reduction and efficiency, beer companies achieved significant improvements in profitability during this period. The net interest rates of China Resources Beer, Tsingtao Brewery, and Budweiser Asia Pacific increased by 9.3 pct, 7.8 pct, and 3.0 pct respectively in 2017-2023. Looking forward to the future, we believe that China's beer industry will continue the trend of high-end development because the desire of leading brewers to promote high-end production is still strong, and because the absolute level of beer unit price in China is still low, consumers are more receptive to minor beer price upgrades.

Interpretation of the pattern: regional segmentation, misplaced competition, sharing the dividends of high-end industry. CR5 in the beer industry has reached more than 90%, and the market concentration is high, but the five major players have different dominant regional markets and competitive price segments. Looking at the subregions, there are mostly single-oligopolistic and one-super-powerful regional markets (accounting for 63.5% of production). Regional leaders in such markets enjoy a stable leading position, making it convenient for them to achieve high-end development. Due to the lack of obvious advantages of regional leaders in a few regions, competition among beer leaders is relatively fierce, and the future market pattern is still variable. In terms of price, leaders compete in misaligned price bands based on their resource endowments to share the industry's high-end dividends. Foreign-funded beer companies are good at brand building and enjoy brand power advantages in the high-end and ultra-high-end beer markets. For example, Budweiser Asia Pacific is in a leading position in the market segment above 10 yuan; domestic beer companies have a solid channel base, are relatively familiar with domestic consumers, and are better at gradually promoting product structure upgrades based on the base market and using key products. In recent years, they have grown rapidly in the 8-10 yuan price range.

High-end approach: Focus on promotion resources, and key products in the 8-12 yuan range are growing rapidly. Currently, the product structure of China's beer industry is pyramidal. It is estimated that economical products under 6 yuan account for more than 40%, mid-range products worth 6-8 yuan account for 20-30%, high-end products 8-10 yuan account for 10-20%, and high-end and ultra-high grade products above 10 yuan account for nearly 20%. Under the high-end development trend of the industry, the promotion resources of brewers are mainly concentrated on core products of 8 yuan or more. After continuous investment and cultivation in the early stages, Chinese consumers' acceptance of the 8-10 yuan price range has increased markedly. Among them, the typical product of Qingdao has reached more than 2 million tons in size and has outstanding natural marketing capacity; some products with a price of 10-12 yuan have successfully established a high-end product image, and the consumption scenario is gradually being expanded, and also has great potential for growth; the current consumption scenario for products of 12 yuan and above is limited, affected by the epidemic and weak consumption power in recent years. The speed of boosting is relatively slow. Taken together, at this stage, the 8-12 yuan market segment has a relatively strong capacity to expand. The rapid growth of key products is an important force driving the high-end industry.

Investment advice: Seize the dividends of the high-end development of the industry and pay attention to the value of beer faucet allocation. The future direction of high-end development of the beer industry is clear, and beer leaders will continue to improve their profitability, which in turn will drive rapid profit growth and further increase ROE. Steady profit growth and abundant cash have created conditions for beer companies to implement high dividend policies. It is expected that the dividend ratio of some beer brewers will steadily increase in the future, which will further enhance the allocation value of beer faucets. The current valuation of the beer sector has fallen back to a historical low, and the sector has ushered in a good layout opportunity. We recommend China Resources Brewery (00291) and Tsingtao Brewery (00168), which are undervalued leading companies with increased potential and increased profitability; recommend high-dividend Chongqing Beer (600132.SH), which has outstanding product portfolio advantages and gradually strengthened channel capabilities; recommend Yanjing Beer (00729.SZ), which has released reform dividends and has strong growth in performance.