occurrences

Company Announces 2024 Interim Report. In 24H1, the company achieved total revenue of 20.068 billion yuan, -7.06% year-on-year, net profit to mother of 3.642 billion yuan, +6.31% year-on-year, after deducting non-return net profit of 3.427 billion yuan, or +6.15% year-on-year.

In 24Q2, the company achieved total revenue of 9.918 billion yuan, -8.89% year-on-year, net profit to mother of 2.044 billion yuan, +3.55% year-on-year, after deducting net profit of 1.914 billion yuan without return to mother, +1.87% year-on-year.

Sales declined slightly, and structural upgrades led to an increase in average price

1) Total sales declined slightly year-on-year, and the middle and high-end are still resilient. 24H1, the company sold 4.63 million kiloliters of beer, -7.8%, of which the main brand Tsingtao Brewery sold 2.61 million kiloliters, -7.2%; sales volume of products above the middle and high-end products was 1.896 million kiloliters, -4.0% year on year; 24Q2, sales volume of beer was 2.446 million kiloliters, or -8.0% year on year. Among them, the main brand Tsingtao Brewery sold 1.288 million kiloliters, -8.7% year on year, and 36 for products above the middle and high-end million kiloliters, -5.5% YoY.

2) The proportion of high-end products increased, leading to an increase in average factory price. In 24H1, the company's high-end product sales accounted for 41.0% of total sales, +1.6 pct. The increase in the share of high-end products led to an increase in the average factory unit price of the company's beer. The average ex-factory price also increased 1.0% to 4.28 yuan/liter.

3) The base camp in Shandong is stable. Looking at the subregion, 24H1, the company achieved external revenue of 129.11/14.65/37.39/1.357/0.356/0.236 billion yuan respectively, or -3.71%/-10.26%/-7.69%/-17.39%/-29.57%/-32.47%.

Profitability continues to improve

1) The increase in gross margin in the first half of the year led to an increase in net profit margin. 24H1, the company's net margin/gross margin was 18.15%/41.60%, +2.28/+2.39pct, respectively. The increase in the company's gross margin was mainly product structure upgrade and cost-side optimization. The unit cost of the company's beer was -3.4% to 2.50 yuan/liter; the company's sales/management/R&D/finance expense ratios were 10.81%/3.32%/0.15%/-1.45%, respectively, -0.25/+0.29/+0.05/-0.42pct; in addition, other revenue accounted for a year-on-year ratio + 0.64pct to 1.43%, mainly due to the year-on-year increase in government subsidies received by some subsidiaries; income tax/minority shareholders' profit and loss accounted for +0.72/+0.14pct of total revenue, to 5.92%/0.40% year over year.

2) Gross profit margin and net profit margin continued to rise in the second quarter. In 24Q2, the company's net interest rate/gross margin was 20.61%/42.80%, respectively, +2.47/+2.71pct, the company's sales/management/R&D/finance expense ratios were +0.43/+0.16/+0.01/-0.40pct, respectively; other income/income tax/minority shareholders' profit and loss accounted for +1.13/+0.79/+0.23pct year on year, respectively.

Investment advice

We expect the company's net profit to be 4.594/4.956/5.25 billion yuan in 24/25/26, respectively, with a growth rate of 7.64%/7.88%/5.95%, corresponding to PE 17/16/15 times on September 3 (market value 78.9 billion yuan), maintaining the “buy” rating.

Risk warning

The high-end process falls short of expected risks, market competition intensifies risks, and food safety risks.