Better outlook for 2H22
- 1H22 normalised EBITDA/profit above market expectations
- Premiumisation to continue in China with better outlook in 2H22, given the ongoing channel recovery
- Strong growth in South Korea and India to also support better sales/earnings recovery in both APAC East and West
- Revised down both FY22/FY23 EBITDA by 4% given the impacts of near-term cost pressure. Maintain BUY with revised TP of HK$32.37
Investment Thesis
1H22 results above market expectations. Sales volume decreased slightly by 1.4% y-o-y to 45m hl in 1H22, amid COVID-19 impacts. Revenue was up 2.7% to US$3.45bn, supported by the 4.2% y-o-y growth in the average selling price (ASP) during 1H22, driven by the ongoing premiumisation. GP margin ropped organically by 2.3ppt to 50.7%, mainly due to the raw material cost pressure in 1H22. Normalised EBITDA was up slightly by 0.4% to US$1,139m, above market expectations, with the normalised EBITDA margin down by 0.74ppt to 33%.
Better recovery in China in 2H22. BUD APAC continued to premiumise its product mix in China with mid-single digit volume growth in the premium/super premium segments in 1H22 vs. prepandemic levels (1H19). With the ongoing recovery in the restaurant and nightlife channels amid the easing COVID- 9 situation in China, we expect BUD APAC to achieve a better recovery momentum in terms of both revenue and EBITDA for APAC West in 2H22. We believe BUD APAC should be able to score flattish volume and a mid-single digit ASP growth in China in FY22.
Overseas to see strong growth. We believe the strong market recovery in South Korea should continue and BUD APAC should achieve at least mid-single digit growth in volume in APAC East, along with double-digit growth in EBITDA for FY22. We also see strong growth potential in India in BUD APAC’s premium/super premium segments over the medium term.
Valuation:
Our revised TP of HK$32.37 continues to be based on APAC West (mostly China) being valued at 23x EV/EBITDA, and APAC East (mainly South Korea) at 15x EV/EBITDA, on a 12-month rolling basis
(previous TP: HK$32.73).
Where we differ:
We are slightly more positive than the market in terms of FY22/FY23 revenue and earnings, as we expect faster sales recovery and efficiency improvements ahead.
Key Risks to Our View:
Resurgence of COVID-19 cases, market share loss, and high volatility of raw material prices
