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日跌超4%的啤酒板块:基本面+估值短期走弱,低估值龙头或迎“高端化”机遇

The Beer Sector, which fell more than 4% today: Weakening fundamentals and valuations in the short term, leading undervalued leaders may welcome opportunities for 'premiumization.'

Zhitong Finance ·  Dec 16, 2024 05:33

Beer remains popular in social occasions, but seems less so in the secondary market.

Beer remains popular in social settings, but it doesn't seem to be the same in the secondary market.

In recent years, with the popularity of the lifestyle pattern 'early C, late A', places such as night music festivals, barbecue stalls, campgrounds, small taverns, and roadside areas have all become popular spots for young people to seek joy and express their emotions. The use of beer to relieve emotions has become a trend, and the related consumer demands continue to expand the boundaries of beer consumption.

However, in contrast to the stock prices and valuations of beer stocks, they are not 'trendy' in the secondary market.

On December 13, the Hong Kong stock market beer sector fell sharply, dropping nearly 5% at one point during the trading session, and closing down 4.09%, recording one of the largest declines, ending at 672 points. Looking at the longer timeline, after reaching a short-term peak of 915.062 points in early October this year, the beer sector quickly turned downward, continuously declining. As of now, the sector has accumulated a drop of over 25% over 51 trading days, with a TTM price-to-earnings ratio of 14.97 times, clearly at a low level.

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(Market source: Futu)

So why is there such a contrasting situation in the beer sector?

Is the improvement in profits entirely reliant on high-end Beer due to market saturation?

Looking through industry data, the beer production in China continues to decline due to market saturation and changes in consumer structure.

In 2014, China's beer production reached its peak in nearly a decade, at about 49.36 million kiloliters. With market saturation and changes in consumer structure, beer production in China fell to 37.65 million kiloliters by 2019. In 2020, due to the impact of the pandemic, consumption scenarios further decreased, especially with the closure of dining and Entertainment venues, which significantly affected beer consumption. In the same year, China's beer production hit rock bottom, declining to 34.11 million kiloliters.

The continuous decline in production reflects a weak market demand.

According to data disclosed by Qince Consumer Statistics, in 2024, the overall demand in the beer Industry is under pressure, with dining consumption and weather factors having a significant impact on beer consumption. From January to October 2024, China's beer production accumulated to 25.36 million kiloliters, a year-on-year decrease of 6.1%. At the same time, the industry shows obvious seasonal differentiation characteristics, with June and July being the highest points for beer production in 2024, reaching 3.586 million kiloliters. This is related to immediate consumption scenarios, where the second and third quarters are traditional peak seasons due to higher temperatures, while the first and fourth quarters, with lower temperatures, are off-peak seasons.

However, even though the second and third quarters are traditional peak seasons, the performance of the beer industry in the first three quarters is not as optimistic as imagined.

According to statistics from Wanlian Securities, in the first three quarters of 2024, the revenue of the beer Sector totaled 60.824 billion yuan, a year-on-year decrease of 1.91%, with a growth rate declining by 9.37 percentage points compared to the same period last year; the net income attributable to the parent company totaled 8.481 billion yuan, an increase of 7.73% year-on-year, with a growth rate declining by 10.15 percentage points compared to the same period last year.

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(Data source: Wanlian Securities)

However, there is also exciting news, which is that the industry's profitability is gradually improving. According to related Research Reports, in the first three quarters of 2024, the Beer Sector's profitability continues to improve, with gross margin and net margin at 44.52% and 16.79%, respectively, a year-on-year increase of +1.68pcts and +1.39pcts.

The performance of the above data undoubtedly reveals the current operational situation of the beer industry—declining revenue, and a saturated market that finds it difficult to develop more demand increments. The improvement in profitability indicates some success in the industry's upscale transformation, but the slowing profit growth may also reflect certain growth pressures.

In the current context of a widely popular healthy consumption concept, most Consumers strive to pursue a minimal and moderate beer drinking pattern. Beer consumption has transitioned from the past simple "joyful drinking" to a now more quality and moderation-focused "refined taste" stage, which is gradually moving from "You want to drink well" to a new period of "You drink something good."

Specific to the upscale progress of various brands, in the first half of the year, CHINA RES BEER's mid-range and above beer sales proportion exceeded 50% for the first time, with mid-high-end and above beer sales achieving single-digit growth compared to the same period last year, and high-end and above beer sales growing by over 10% year-on-year; Tsingtao Brewery's main brand sales were 2.61 million kiloliters, with mid-high-end and above products achieving sales of 1.896 million kiloliters, driving a year-on-year revenue growth of 1% for the company. However, compared to last year's data, there has been a varying degree of decline.

Additionally, due to the delayed upscale process of Beijing Yanjing Brewery and Guangzhou Zhujiang Brewery, the high growth was mainly influenced by the low base effect of the same period last year. The 2024 semi-annual report shows that Beijing Yanjing Brewery's mid-high-end products achieved revenue of approximately 5.064 billion yuan, a year-on-year increase of 10.6%, accounting for 68.54% of the main business income; Guangzhou Zhujiang Brewery also performed well, with high-end product revenue of 2.04 billion yuan in the first half of the year, a year-on-year increase of 17.19%, accounting for 70.95% of the main business income.

It can be seen that, under the pressure of continuously weak industry demand and slowing growth, the performance and valuation of related beer stocks in 2024 are obviously under significant pressure, which is also to be expected.

The trend of upscale transformation continues; will underperforming leaders seize the opportunity for layout?

As the saying goes, "No winter is insurmountable." Indeed, the Beer Industry has been enduring a "stock competition era" for a long time, but moving towards high-end products remains a key breakthrough.

Currently, the Beer Industry has entered the latter stage of the high-end process, with leading liquor companies deeply refining and perfecting their operational systems, continuously exploring product quality, and striving to elevate model products to popular L-level products of one million tons, thereby achieving a national layout and promotion of high-end products.

Looking ahead to the next five years, the pricing structure of the beer market will undergo significant changes, with mid-range beers in the 8 - 10 yuan price range gradually replacing the current 6 yuan price range. This trend towards high-end development has a high degree of certainty. The market size of the 6 yuan price range is expected to expand from the current approximately 6 million tons to about 8.5 million tons, while sales in the 10 yuan and above price range will also expand from around 6 million tons to 8 million tons, although the rate of expansion will be somewhat slower compared to the next-highest tier products.

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(Photo source: Qince Consumer Research)

Furthermore, the industry will enter a stage of refining operations and high-end nationalization, with the proportion of low-end products contracted further, while the sales proportion of high-end and next-high-end products increases, and the industry net margin is expected to continue improving.

In this development context, some undervalued leaders with a first-mover advantage in high-end layout may welcome new opportunities.

Among them, Debon Securities pointed out that aside from Chongqing Brewery's gross margin remaining stable at around 50% over the long term, the overall quarterly gross margin levels of mainstream beer companies have shown a year-on-year increasing trend over the past three years, indicating that the industry's commitment to high-end development has not changed. Looking forward to 2025, it is expected that under policy stimulus, the consumption scenario of beer on-site will accelerate recovery, with the industry's entry into high-end development remaining relatively optimistic, and leading companies are expected to return to a growth track of both volume and price increase, potentially improving the weak fundamentals of beer.

In addition, Open-source Securities also stated that beer sales were lower than expected due to weather conditions this year. Looking ahead to 2025, against a low base, with the economic recovery, the dining sector is likely to rebound, which will also catalyze beer sales. Coupled with the ongoing industry structural upgrades, attention can be paid to low-valued leading brands such as Tsingtao Brewery (00168) and CHINA RES BEER (00291).

Considering all the above factors, Zhito Finance APP believes that under the backdrop of policy stimulation for consumer recovery and the restoration of dining scenarios, beer remains a benefiting Sector, and is likely to experience improvements in both fundamentals and valuations. Meanwhile, despite the fierce market competition and high industry concentration (CR6 sales in China's beer industry reached 92.6% in 2023), it is foreseeable that through industry reshuffling, strong companies will increasingly highlight their market value. Therefore, it is recommended to closely monitor the recovery opportunities of low-valued leading beer brands.

The translation is provided by third-party software.


The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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