According to a report by HSBC Research, beer stocks have fallen 7% since the beginning of the year, relative to the CSI 300 index, which has risen by 3%, due to weak sales in recent months. In view of the slowdown in demand, the Bank expects beer sales in the second quarter to be similar to those in the second half of last year and the first quarter of this year, with an average decrease of 2.8% per year. However, the average price of products should continue to expand, with annual growth slowing to 0.4%.

Of the beer companies covered by the Bank, it is expected that profits will grow by a single digit percentage this year, with revenue growth also at a low single digit percentage. This is mainly due to a rebound in sales in the second half of the year from a low base and the support of sports events such as the Paris Olympics. Overall, the Bank expects the growth of beer stocks to be stable but uneven this year, with more beer companies that are more accessible to the general public performing better. The Bank believes that the industry's valuation is attractive and that there is a possibility for re-evaluation if performance improves in the third quarter.

The Bank prefers China Resources Beer (291.HK) and Tsingtao Brewery (168.HK), both of which are rated as "Buy." The Bank believes that they will benefit from a rebound in sales in the third quarter from a low base and the continued sales growth in the mass market resulting from product upgrades.

HSBC Research's investment ratings and target prices for beer stocks are listed below:

Stock | Investment Rating | Target Price (HKD)

China Resources Beer (291.HK) | Buy | HKD 45.5 -> HKD 37.8

Tsingtao Brewery (168.HK) | Buy | HKD 70.5 -> HKD 64.1

Bud APAC (1876.HK) | Hold | HKD 11.4 -> HKD 10.5