Incident: Tsingtao Brewery released its 2024 quarterly report. 2024Q1 achieved revenue of 10.150 billion yuan, -5.19% year-on-year, net profit to mother of 1,597 billion yuan, +10.06% year-on-year, after deducting net profit of 1,513 billion yuan, or +12.11% year-on-year.
Sales were slightly under pressure due to a high base, and profit releases exceeded expectations. The company's revenue side was slightly under pressure in the first quarter under high base, and the profit side exceeded expectations. 2024Q1's sales revenue reached 9.622 billion yuan, +5.17% year over year, higher than the revenue growth rate. Looking at volume and price breakdown, 2024Q1's sales volume/ton price were 2.184 million kiloliters/4,647 yuan/kiloliters, respectively, -7.6%/+2.6%. Among them, the main brand Tsingtao Brewer/high-end products achieved sales volume of 132.2/960,000 kiloliters, or -5.6%/-2.4% year-on-year. The sales volume of middle and high-end products and above accounted for 44.0% of sales, compared to +2.3 pct. It is expected that classic and white beers will continue to increase rapidly. The newly launched Tsingtao Brewery 1 liter of premium purée and 1 liter of pure crystal fresh products will be delivered “fresh”” Mode It meets consumers' demand for fresh beer and drives the continuous improvement of the product structure. The off-season in the first quarter was dominated by inventory removal, and sales were under slight pressure from a high base. The peak season in April began and entered a low base. The peak season in the second quarter was catalyzed by popular sporting events such as the Olympics and European Cup. Sales are expected to recover at a high rate. The pace for the whole year is expected to be low and high, with significant month-on-month improvement. Looking ahead to 2024, the company will accelerate the implementation of the “1+1+1+2+N” product portfolio development strategy for Tsingtao Brewery's main brand to achieve full range of multi-channel product coverage. The company adheres to the high-end path, and it is expected that the product structure will continue to be optimized.
Cost reduction dividends have gradually been released, and net interest rates to the mother have increased significantly. The gross margin of the 2024Q1 company reached 40.44%, +2.1pct year on year. The increase in gross margin was mainly due to the 1.0% year-on-year decrease in the cost per ton, and the dividends of falling raw material prices were gradually released. The 2024Q1 tax and additional/sales/management/R&D/finance expenses rates were 6.00%/12.83%/3.40%/0.18%/-1.39%, respectively, compared with +0.14/ -1.01/+0.41/+0.08/-0.43pct. The sales expenses rate decreased significantly, and the efficiency of cost investment improved. 2024Q1 net margin reached 15.99%, +2.23pct year on year. Net interest rate growth was impressive due to cost improvements and cost efficiency. Looking ahead to 2024, barley prices are expected to continue to decline this year due to the cancellation of Australia's “double reverse” measures. Furthermore, falling prices of packaging materials such as glass bottles, aluminum, and corrugated paper are expected to strengthen cost improvements, which is expected to drive net interest rates to continue to grow.
Investment advice: The revenue growth rate is expected to be 5%/5%/4% in 2024-2026, the net profit growth rate is 18%/15%/13%, EPS is 3.69/4.23/4.77 yuan respectively, and the corresponding PE is 22x/19x/17x, respectively. Based on the 2024 results, the target price is 92.25 yuan, giving a “buy” rating.
Risk warning: Food safety risks, structural upgrades falling short of expectations, and increased risk of industry competition.