On April 13, beer stocks showed a good trend today, with China Resources Beer and Tsingtao Brewery both up more than 4 per cent.

CITIC research newspaper pointed out that the beer industry recovered well in the first quarter, and continued to be optimistic about the high-end investment value of the beer industry, the first being China Resources Beer, Chongqing Beer, and recommended Tsing Tao Beer and Budweiser Brewing Company APAC Limited.

2021Q1 sales basically returned to the pre-epidemic level, and the structural upgrading was good under high-end technology.

According to the National Bureau of Statistics, beer sales from January to February in 2021 were 5.05 million liters, basically returning to the level of the same period in 2019, an increase of 61% compared with the same period in 2020. China Resources Beer's 2021Q1 sales are expected to achieve low single-digit growth compared with 2019Q1; Tsing Tao Beer's 2021Q1 sales are expected to increase slightly compared with 2019Q1 (about 35% compared with 2020Q1); heavy Beer is loaded into Carlsberg China assets on balance sheet, and 2021Q1 sales are expected to grow rapidly year-on-year, driven by products such as Wusu and Le Bao. The market in Budweiser's southern district is recovering well, but considering the drag on markets such as central and southwest China, 2021Q1 sales are expected to decrease compared with the same period last year (with an increase of 65% compared with 2020Q1).

In terms of tonnage prices, taking into account the reduction in the return of the epidemic-high-end promotion, the leader is expected to have a good performance in the first quarter. China Resources low-end products shrink-high-end upgrading results are obvious, is expected to achieve medium and high unit growth (regardless of bottle policy); Tsingtao Beer benefits from the price increase in May 2020, 2021Q1 ton price is expected to achieve medium unit growth; heavy Beer & Budweiser structure upgrading continues to advance. On the profit side, although the cost pressure is gradually reflected, it is expected to show higher elasticity considering the pre-2020Q4 of some sales expenses and the low base effect (Budweiser > Qingdao > heavy beer is expected to be elastic).

2021Q2's revenue is under pressure from a high sales base, and tonnage performance is expected to continue.

Considering that the 2020Q2 industry has experienced replenishment and retaliatory consumption after the epidemic (sales of 2020Q2 beer companies above scale also increased by 9.5%), we expect the performance of leading 2021Q2 sales to be under pressure at a higher base. Among them, China Resources / Tsingtao Beer expects 2021Q2 sales to achieve year-on-year low-unit growth in 2019Q2 (expected to decrease in units compared with the same period last year); Carlsberg expects the trend of 2021Q2 nationalization will remain unchanged, but as the company faces a high base, it is difficult to predict the situation of 2021Q2; Budweiser Brewing Company APAC Limited due to the late recovery of 2020Q2 night channels, we expect 2021Q2 sales to achieve positive year-on-year growth, we will continue to pay attention to the impact of security regulation on nightclub channels.

Tonnage, in the overall sub-regional sub-category price adjustment-high-end upgrading background, the companies are expected to maintain the first quarter year-on-year growth performance. China Resources Heineken & SuperX has a good growth momentum, with products such as snowflake refreshing driving up prices in different regions; as for Tsingtao Beer, it will still enjoy the ASP improvement brought about by the price increase in Shandong in April (the company began to raise the price of Tsingtao Beer Classic & Laoshan products on May 1, 2020), and the price adjustment effect of 2021Q1 on products from Shaanxi, Shanghai and Xinjiang is expected to continue to reflect. Heavy beer / Budweiser is expected to maintain rapid ASP growth as a whole, driven by high-end-ultra-high-end products.

The price of barley has increased significantly, so the possibility of price increase before the peak season can not be ruled out.

From the point of view of cost split, packing material / malt accounts for about 50% of the total cost, 10% and 15% of the total cost.

① cardboardAccording to the paper industry news, the price of containerboard in the packing material has increased by about 19% compared with the same period last year. Considering that the containerboard is difficult to achieve price locking or large-scale hoarding, it is expected to be transmitted to the production side within 3-6 months.

② glass bottle:We expect the price increase of glass bottles to be in double digits, but considering that the actual cost of glass bottles is related to the market share of the company and the number of bottles returned, the overall actual impact on the cost per ton is limited.

③ malt:According to Tianjin Port data, Australian wheat prices rose about 18 per cent year-on-year. Considering that companies will purchase or lock in part of the malt cost in advance, we expect the malt cost to rise slowly.

To sum up, we expect the increase in the cost of 2021Q2 tons to be at a high unit level. In the high-end background, the profits of all companies are expected to release flexibility, but with the increase of the cost side, the elasticity releases great pressure. Based on the current background, the probability of companies choosing to use price increases to transfer cost pressure in Q2 continues to increase.

Risk factors.

Epidemic control is not as good as expected risk; food safety risk; vicious competition risk.

Investment suggestion

From the recent follow-up, the trend of high-end industry continues to reflect, including Heineken European Cup activities, Qingdao night owls and other activities continue to carry out on a large scale, brand marketing-driven structural upgrading is expected to accelerate. At the same time, with the superposition of the 2021 Olympic Games and the early 2022 Winter Olympic Games, sports activities are expected to promote a new round of high-end marketing activities, and we continue to be optimistic about the high-end investment value of the beer industry. First China Resources Beer, Chongqing Beer, recommended Tsing Tao Beer, Budweiser Brewing Company APAC Limited.