The high-end strategy has achieved remarkable results, and the valuation is at a historically low rank, giving it an “increase in wealth” rating.
As the largest beer leader in China, the company accelerated its high-end development after acquiring Heineken's assets in China. We expect the company to achieve net profit of 59.90, 66.95, and 7.352 billion yuan in 2024-2026, corresponding EPS of 1.85, 2.06, and 2.27 yuan, up 16.2%, 11.8%, and 9.8% year-on-year. The current price corresponds to 14.2, 12.7, and 11.6 times PE in 2024-2026. The company's high-end strategy has achieved remarkable results, profits have continued to be released, and the company's valuation processing history is low, and for the first time coverage has given a “gain in wealth” rating.
Industrial structure upgrading and high-end technology are still the main themes
Domestic beer demand has gradually stabilized since 2016. Farewell to the era of rapid progress and expansion to compete for sales, leading shares have gradually been concentrated. The beer industry has shown a regionally divided market pattern, and the industry has begun to enter a stage of high-quality development focusing on operational efficiency and structural upgrading. Looking at supply, on the one hand, the pattern is stable and gradually improving under stock competition. Leading companies shut down factories to improve efficiency, small and medium-sized breweries have withdrawn from the market, and the industry's production capacity burden has been cleared; on the other hand, with the upgrading of beer consumption and the rise of young consumers, the high-end beer market continues to expand. Leading companies are actively promoting product upgrading, and the overall profits of the industry are being released at an accelerated pace.
The 3+3+3 strategy has entered the third stage. The development of leading share companies and decisive high-end companies has always revolved around the “3+3+3” strategic layout, which has determined 3 stages of development and the grand goal of becoming a world-class beer company. The company has completed the first and second stages of tasks, namely the first stage of removing burdens (closing the factory to optimize production capacity and streamlining the team), strengthening the foundation (improving product quality and innovation+improving execution, etc.), storing energy (connecting Heineken to promote 4+4 brand matrix construction), improving quality (upgrading operational quality again), and increasing efficiency (capacity improvement+management optimization+financial transformation to comprehensively improve profitability). Currently, we are moving towards the third stage, namely winning high-end (the high-end market exceeds all competitors), double benchmarking (“double benchmarking” with top beer companies at home and abroad), and being first-class (achieving “double transcendence” in market value and profit, becoming world-class). Currently, the company continues to build heavyweight products such as Heineken and Chunsheng to promote high-end products; organize secondary reengineering and open up production and marketing links to reduce operating costs; optimize the national production capacity layout, improve operating efficiency, and move forward in all aspects to become a world-class beer company.
Risk warning: Risk of continued weakening demand for food and beverage, risk of rising costs too fast, increased risk of competition, and risk of rainy weather.