Tsingtao Brewery Co (TSGTF – Research Report), the Consumer Defensive sector company, was revisited by a Wall Street analyst yesterday. Analyst Euan McLeish from Bernstein upgraded the rating on the stock to a Buy and gave it a HK$68.00 price target.
Euan McLeish has given his Buy rating due to a combination of factors including Tsingtao Brewery Co.’s robust Q4 performance and the anticipation of favorable cost conditions. Despite an observed volume decline, Tsingtao managed to expand its margins, particularly the gross and operating margins, with earnings per share exceeding Bernstein’s estimates. The company’s adept handling of pricing and product mix, alongside cost savings in selling and investment, effectively compensated for the decreased operational leverage.
The resilience in Tsingtao’s mid-to-high-end product volumes, alongside a substantial ownership increase in the Anshan brewery, suggests a strategic positioning for growth. Looking ahead, McLeish identifies potential cost of goods sold (COGS) tailwinds due to declining commodity prices, which are projected to benefit the brewery sector broadly in 2024. With these factors in mind, coupled with revised upward earnings estimates and a consistent target multiple, McLeish justifies the Outperform rating for Tsingtao’s H-share, indicating a strong confidence in the company’s financial outlook and market performance.
In another report released yesterday, Jefferies also maintained a Buy rating on the stock with a HK$82.00 price target.
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Tsingtao Brewery Co (TSGTF) Company Description:
Tsingtao Brewery Co., Ltd. engages in the manufacture and sale of beer and related products. It operates through the following business segments: Shandong; South China; North China; East China; Southeast; Hong Kong, Macau, and overseas; and Finance. The Shandong segment engages in the production and sale of beer in Shandong and surrounding areas. The South China, North China, East China, and Southeast segments engage in the production and sale of beer in the respective areas. The Hong Kong, Macau, and overseas segment engages in the sale of beer in Hong Kong, Macau, and overseas. The Finance segment handles the financial management and financial transactions such as payment and collection of member units. The company offer the verities of beer include Great ocean beer, Huiquan beer, Tsingtao draft beer, Tsingtao dark beer, Tsingtao beer premium and Tsingtao beer. Tsingtao Brewery was founded in August 1903 and is headquartered in Qingdao, China.
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