Weak demand and pressure on revenue

2024Q1-Q3's revenue was 28.96 billion yuan, -6.5% YoY; net profit before and after before and after deducting 4.99 and 4.69 billion yuan, +1.7% and +2.0% YoY. 2024Q3's revenue was 8.89 billion yuan, -5.3% YoY, net profit of 1.35 and 1.26 billion yuan before and after deducting pre- and backward net profit, -9.0% and -7.9% YoY. Due to weak demand for catering, the volume and price of beer continues to be under pressure. We lowered our 2024-2026 net profit forecast to 4.393/4.832/5.145 billion yuan (previous value 4.591/5.041/5.365 billion yuan), corresponding to 2024-2026 EPS 3.22/3.54/3.77 yuan. The current stock price corresponds to 20.8/18.9/17.8 times PE. The stimulus policy is implemented. Catering demand is expected to improve in 2025, driving the recovery and maintenance of beer demand “Accumulation” rating.

Structure and sales are under pressure, and demand is still sluggish

2024Q1-Q3 beer sales volume was -7.0% YoY, tonnage price +0.5% YoY, and structural upgrades slowed; among them, sales of main brands and sub-brands were -6.2% and -7.9% YoY, and sales of medium to high-end beer were -4.2% YoY. 2024Q3 beer sales volume was -5.1% year-on-year, and the tonnage price was -0.2%. Volume and price performance was under pressure, mainly due to a high base combined with declining consumption power and weak demand for food and beverage. The growth rate of tonnage prices is expected to slow down mainly due to declining consumption power, weak demand for premium beer over 10 yuan due to weak catering, and structural improvements are slowing down.

Reduced raw material prices led to a marked improvement in gross margin

The net profit margin for 2024Q3 was 0.63 pct year on year, of which the company's gross margin was +1.19 pct year on year. Among them, the tonnage price was -0.2%, and the cost per ton was -2.2%. The decrease in ton costs was mainly due to a marked decrease in the cost of barley, packaging materials, etc. Sales, management, R&D, and finance expense ratios were +2.41, -0.87, +0.17, and -0.40pct, respectively. The decline in revenue scale led to a steady, moderate increase in cost ratios.

Unload your baggage in 2024 and easily enter battle in 2025

Since 2024Q2, the industry has faced multiple pressures such as increased rainy weather and declining demand for catering. Demand for 2024Q3 beer continued to be sluggish, falling short of industry expectations. Industry sales are expected to decline slightly throughout the year, and the decline in consumption through current drinking channels will affect sales of middle and high-end beer, and there is still structural pressure. The industry maintains the trend of removing inventory, unloading the burden in 2024, and entering the battle easily in 2025.

Risk warning: risk of rising costs, risk of rainy weather, risk of macroeconomic slowdown, risk of food safety