Key Points Company and Industry Information 1. **Company Name**: Budweiser Brewing Company APAC Limited 2. **Date of Results Announcement**: 31st March 2024 3. **Hosts of the Call**: Mr. Jan Kraps, Chief Executive Officer and Co-Chair of the Board; Mr. Ignacio Larris, Chief Financial Officer 4. **Availability of Results**: Press release published earlier today, available on the Hong Kong Stock Exchange's Budweiser APAC's websites [1]. Core Views and Arguments 1. **Overall Performance**: The call will discuss the financial results for the first quarter of 2024, including revenue, earnings, and other key metrics [1]. 2. **Market Trends**: The discussion will likely cover market trends and consumer behavior in the beer industry in the APAC region [1]. 3. **Strategic Initiatives**: The company's strategic initiatives and future plans will be highlighted, including expansion into new markets and product innovation [1]. Other Important Content 1. **Press Release**: The full details of the financial results can be found in the press release published earlier today [1]. 2. **Industry Comparison**: The call may include comparisons with industry benchmarks and competitors [1]. 3. **Investor Queries**: The call will likely address investor queries and concerns regarding the company's performance and future prospects [1].

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876.HK) [3] Core Views - The company reported Q1 2024 revenue of $1.643 billion, with a year-on-year decline of 0.4% in organic terms; normalized EBITDA was $572 million, reflecting a 4.2% increase year-on-year; net profit attributable to shareholders was $287 million, down 3.4% year-on-year [1][2] - Revenue growth was impacted by a high base and weather conditions in the Chinese market, but the company continues to successfully implement its premiumization strategy [2] - The company expects a continued decline in costs throughout the year, driven by lower raw material prices [1] Summary by Sections Financial Performance - Q1 2024 sales volume was 2.1115 million kiloliters, down 4.8% year-on-year; average price per ton of beer increased by 4.6% [1] - Gross margin for Q1 2024 was 51.5%, up 2.06 percentage points year-on-year, primarily due to lower barley prices [1] - Normalized EBITDA margin increased by 1.53 percentage points year-on-year [1] Regional Performance - Western Asia: Q1 2024 revenue and normalized EBITDA decreased by 1.5% and increased by 2.0% year-on-year, respectively; sales volume down 4.9% [1] - Eastern Asia: Q1 2024 revenue and normalized EBITDA increased by 5.2% and 18.7% year-on-year, respectively; sales volume down 4.0% [1] Future Outlook - The company forecasts net profit for 2024-2026 to be $1.040 billion, $1.176 billion, and $1.317 billion, respectively, with corresponding EPS of 0.56, 0.63, and 0.71 RMB [2] - The current stock price corresponds to a P/E ratio of 18x, 16x, and 14x for 2024-2026 [2]

Investment Rating - The report maintains a "Buy" rating for Budweiser Brewing APAC (1876 HK) with a target price of HKD 15.60, indicating a potential upside of 36.6% from the current closing price of HKD 11.42 [1][10]. Core Insights - In Q1 2024, Budweiser experienced a decline in sales volume but an increase in average selling price (ASP), leading to better-than-expected margin expansion. Revenue showed a slight year-on-year decline of 0.4%, while ASP increased by 4.6% [1]. - The EBITDA margin improved by 153 basis points to 34.8%, driven by a 206 basis point increase in gross margin to 51.5% [1]. - The company reported a 6% decline in sales volume in the Chinese market, attributed to high base effects from the previous year and adverse weather conditions in March [1]. - South Korea emerged as a highlight with a 9.6% increase in ASP, resulting in a 5.2% increase in sales revenue and an 18.7% increase in EBITDA [1]. Financial Overview - For the fiscal year ending December 31, 2024, the projected revenue is USD 7.478 billion, reflecting a year-on-year growth of 9.1% [2][11]. - The net profit for 2024 is estimated at USD 1.105 billion, with an expected earnings per share (EPS) of USD 0.08, representing a significant growth of 29.7% compared to the previous year [2][11]. - The report highlights a consistent increase in the dividend yield, projected to reach 4.3% in 2024 [2]. Regional Performance - The Asia-Pacific regions showed a decline in sales volume, with East Asia down 4.0% and West Asia down 4.9%, but high-end product sales continued to grow, contributing positively to EBITDA [1]. - The company plans to expand its geographic footprint, increasing the number of cities covered by its brands and its B2B management platform, BEES [1]. Stock Performance - The stock has seen a significant fluctuation, with a 52-week high of HKD 22.20 and a low of HKD 9.88, indicating volatility in market performance [4].

Investment Rating - The report maintains a "Recommend" rating for Budweiser APAC (01876 HK) with a target price of HKD 15 5 [1] Core Views - Budweiser APAC faced volume pressure in Q1 2024 but benefited from price increases and cost efficiencies leading to improved profitability [1] - The company achieved a normalized EBITDA of USD 572 million up 1 4% YoY and normalized net profit attributable to shareholders of USD 297 million down 1 0% YoY [1] - In the Asia Pacific West region China experienced a 4 9% YoY decline in volume due to high base effects and unfavorable weather but saw a 3 6% YoY increase in price per ton driven by premiumization [1] - The Asia Pacific East region saw a 4 0% YoY decline in volume but a significant 9 6% YoY increase in price per ton due to price hikes in South Korea and other markets leading to an 18 7% YoY increase in normalized EBITDA [1] - Overall the company's price per ton increased by 4 6% YoY and gross margin improved by 2 1 percentage points to 51 5% [1] - The report expects sales growth to improve as base effects normalize and profitability to continue rising due to premiumization and cost efficiencies [1] Financial Performance Summary - Q1 2024 revenue was USD 1 643 billion down 3 5% YoY [1] - Normalized EBITDA margin increased by 1 5 percentage points YoY to 34 8% [1] - The company's gross margin improved to 51 5% up 2 1 percentage points YoY [1] - Sales general and administrative expenses as a percentage of revenue increased slightly by 0 8 percentage points to 28 2% [1] Regional Performance - **Asia Pacific West**: Volume declined by 4 9% YoY but price per ton increased by 3 6% YoY with EBITDA margin up 1 45 percentage points YoY [1] - **Asia Pacific East**: Volume declined by 4 0% YoY but price per ton surged by 9 6% YoY with EBITDA margin up 3 34 percentage points YoY [1] Future Outlook - The report forecasts a gradual improvement in sales growth as base effects normalize and competitive positioning strengthens in South Korea [1] - Continued premiumization and cost efficiencies are expected to drive further profitability improvements [1] - The 2024-2026 net profit forecasts are adjusted to USD 1 03 billion USD 1 17 billion and USD 1 29 billion respectively with corresponding PE ratios of 18x 16x and 15x [1] Financial Projections - Revenue is projected to grow from USD 7 235 billion in 2024E to USD 7 947 billion in 2026E with a CAGR of 4 3% [2] - Net profit attributable to shareholders is expected to grow from USD 1 03 billion in 2024E to USD 1 288 billion in 2026E with a CAGR of 9 8% [2] - The PE ratio is forecasted to decline from 18 1x in 2024E to 14 5x in 2026E [2]

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876.HK) with a target price of HKD 14.0, representing a potential upside of 27.3% from the current price of HKD 11.0 [4][5][22]. Core Views - Despite a weaker-than-expected EBITDA growth in Q1 2024, the report expresses optimism for a double-digit growth in organic EBITDA for the full year 2024, driven by strong product mix improvements in China, stable unit costs, and potential growth in South Korea [3][4]. - The report highlights that the increase in expense ratio in Q1 2024 is primarily due to marketing timing and base effects, and expects the expense ratio to remain stable year-on-year for the full year [3][4]. - The report notes that Budweiser's brand continues to drive product mix improvements in China, with a 3.7% increase in average selling price despite a 6.2% decline in volume [3][4]. Summary by Sections Financial Performance - Q1 2024 revenue decreased by 0.4% year-on-year, with a 4.8% decline in volume but a 4.6% increase in average selling price [3][18]. - The report projects 2024 revenue of USD 7.18 billion, reflecting a 4.7% year-on-year growth [12][13]. - The net profit for 2024 is estimated at USD 1.099 billion, representing a 28.9% year-on-year increase [12][13]. Market Dynamics - The report indicates that the Chinese market is experiencing a shift towards premium and super-premium products, which is expected to continue driving revenue growth [3][4]. - In South Korea, price increases from the previous year are expected to support significant EBITDA growth in the coming quarters, despite a slight decline in volume [3][4]. Valuation - Budweiser APAC's current EV/EBITDA is 6.8x, which is significantly lower than industry peers, suggesting a high valuation discount [3][4]. - The report estimates a target price of HKD 14.0 based on a sum-of-the-parts valuation, with a focus on the East Asia and West Asia segments [19][22].

[Performance Summary](index=2&type=section&id=Performance%20Summary) [Q1 2024 Key Financial Metrics](index=2&type=section&id=Q1%202024%20Key%20Financial%20Metrics) Despite a 4.8% volume decrease and 0.4% revenue decline in Q1 2024, Budweiser APAC achieved 4.2% organic Normalized EBITDA growth and a 153 basis point margin expansion to 34.8% through premiumization and cost control Q1 2024 Key Performance Indicators | Metric | Q1 2024 | YoY Change (Organic) | | :--- | :--- | :--- | | Total Volume (hundred thousand liters) | 21,115 | -4.8% | | Revenue (USD million) | 1,643 | -0.4% | | Revenue Per HL Growth | N/A | +4.6% | | Normalized EBITDA (USD million) | 572 | +4.2% | | Normalized EBITDA Margin | 34.8% | +153 basis points | | Normalized Profit (USD million) | 297 | -1.0% | | Normalized EPS (cents) | 2.26 | -0.4% | - CEO Jan Craps stated that despite mild industry performance, the company achieved **EBITDA growth and margin expansion**, primarily driven by **brand premiumization and revenue management** across key markets, boosting **net revenue per hectoliter**[4](index=4&type=chunk) [Management Commentary and Consolidated Results](index=3&type=section&id=Management%20Commentary%20and%20Consolidated%20Results) [Management Commentary](index=3&type=section&id=Management%20Commentary) Management emphasized profit margin improvement in China, market share gains and strong EBITDA growth in South Korea, and double-digit revenue growth in India, driven by premiumization and effective revenue management - Management noted positive progress in key markets like China, South Korea, and India, particularly excelling in **premiumization, market share, and profit margins**[9](index=9&type=chunk) [Consolidated Results](index=3&type=section&id=Consolidated%20Results) Consolidated results indicate a 4.8% volume decrease but only a 0.4% revenue decline due to 4.6% revenue per hectoliter growth, with gross profit up 3.8% organically and Normalized EBITDA up 4.2%, expanding its margin to 34.8% Table 1. Consolidated Results (USD million) | Metric | Q1 2024 | Q1 2023 | Organic Growth | | :--- | :--- | :--- | :--- | | Total Volume (hundred thousand liters) | 21,115 | 22,075 | -4.8% | | Revenue | 1,643 | 1,702 | -0.4% | | Gross Profit | 846 | 854 | 3.8% | | Gross Margin | 51.5% | 50.2% | +206 basis points | | Normalized EBITDA | 572 | 580 | 4.2% | | Normalized EBITDA Margin | 34.8% | 34.1% | +153 basis points | | Normalized Profit Attributable to Equity Holders of Budweiser APAC | 297 | 300 | N/A | | Normalized Basic EPS (cents) | 2.26 | 2.27 | N/A | [Business Review](index=4&type=section&id=Business%20Review) [APAC West](index=4&type=section&id=APAC%20West) APAC West saw a 4.9% volume decrease and 1.5% revenue decline, yet product premiumization drove a 3.6% increase in revenue per hectoliter, leading to 2.0% Normalized EBITDA growth, with strong India market performance offsetting China's impact APAC West Performance | Metric | Organic Growth Rate | | :--- | :--- | | Volume | -4.9% | | Revenue | -1.5% | | Revenue Per HL | +3.6% | | Normalized EBITDA | +2.0% | [China Market](index=4&type=section&id=China%20Market) China market volume and revenue declined by 6.2% and 2.7% respectively due to a high base and unfavorable weather, yet premium product growth drove a 3.7% increase in revenue per hectoliter, 1.0% Normalized EBITDA growth, and a 145 basis point margin expansion, with BEES expanding to over 265 cities - Premiumization strategy yielded significant results: the combined volume share of premium and super-premium products increased by **2.5 percentage points**, with innovative products like Budweiser Gold and Black achieving **double-digit growth**[13](index=13&type=chunk) - Brand activities and innovation: plans include launching **Budweiser 0.0**, **Corona non-alcoholic** and **low-calorie beers**, and strategic partnerships with **NBA** and **Trip.com** to connect with consumers and drive growth[13](index=13&type=chunk)[15](index=15&type=chunk) - Digital transformation: The B2B platform **BEES** has expanded its coverage to over **265 cities**, with the company focusing on leveraging technology to enhance commercial capabilities[13](index=13&type=chunk) [India Market](index=5&type=section&id=India%20Market) India's business continued to outperform peers, with both volume and revenue achieving double-digit growth, and premium and super-premium product portfolio revenue also recording double-digit growth, indicating strong momentum - India's business volume, revenue, and premium and super-premium product portfolio revenue all achieved **double-digit growth**, consistently outperforming the industry[16](index=16&type=chunk) [APAC East](index=5&type=section&id=APAC%20East) APAC East volume decreased by 4.0%, but effective revenue management drove a significant 9.6% increase in revenue per hectoliter, leading to a 5.2% total revenue growth and a strong 18.7% Normalized EBITDA growth, with margin expanding by 334 basis points APAC East Performance | Metric | Organic Growth Rate | | :--- | :--- | | Volume | -4.0% | | Revenue | +5.2% | | Revenue Per HL | +9.6% | | Normalized EBITDA | +18.7% | [South Korea Market](index=5&type=section&id=South%20Korea%20Market) South Korea market volume saw a mid-single-digit decline due to mild industry performance; however, effective revenue management led to high-single-digit revenue per hectoliter growth and mid-single-digit total revenue growth, with the company's overall market share increasing, including brands like Cass, HANMAC, and Stella Artois gaining share in retail and on-premise channels - Market share growth: Despite industry weakness, the company achieved an increase in its **total market share** in South Korea[17](index=17&type=chunk) - Product innovation: To cater to health trends, the company launched **'Zero Sugar' Cass low-calorie beer** and permanently added the limited-edition **Cass Lemon Squeeze** to its product portfolio[17](index=17&type=chunk) [Consolidated Financial Data Analysis](index=6&type=section&id=Consolidated%20Financial%20Data%20Analysis) [Consolidated Income Statement](index=6&type=section&id=Consolidated%20Income%20Statement) The Q1 2024 consolidated income statement shows revenue of **USD 1,643 million**, a slight decrease, with gross profit at **USD 846 million** (3.8% organic growth), normalized operating profit at **USD 408 million** (3.9% organic growth), and profit attributable to equity holders at **USD 287 million** Table 2. Budweiser APAC Consolidated Income Statement (USD million) | Item | Q1 2024 | Q1 2023 | Organic Growth | | :--- | :--- | :--- | :--- | | Revenue | 1,643 | 1,702 | -0.4% | | Cost of Sales | (797) | (848) | 4.4% | | Gross Profit | 846 | 854 | 3.8% | | Normalized Operating Profit | 408 | 418 | 3.9% | | Profit for the Period | 293 | 305 | N/A | | Profit Attributable to Equity Holders of Budweiser APAC | 287 | 297 | N/A | [Key Financial Items Analysis](index=6&type=section&id=Key%20Financial%20Items%20Analysis) This quarter saw a 4.8% volume decrease, partially offset by a 4.6% increase in revenue per hectoliter, mitigating the impact on total revenue; cost of sales decreased by 4.4% due to productivity gains and cost efficiency, while selling, general and administrative expenses rose by 3.0% due to increased commercial investments - Volume decreased by **4.8%**, primarily due to mild industry performance in the China and South Korea markets[19](index=19&type=chunk) - Revenue decreased by **0.4%**, but revenue per hectoliter grew by **4.6%** driven by premiumization[19](index=19&type=chunk) - Cost of sales decreased by **4.4%**, benefiting from productivity improvements, cost efficiency management, and favorable commodity prices[20](index=20&type=chunk) - Selling, general and administrative expenses increased by **3.0%**, primarily attributed to increased commercial investments[21](index=21&type=chunk) [Profit and Earnings Per Share](index=7&type=section&id=Profit%20and%20Earnings%20Per%20Share) Profit attributable to equity holders of Budweiser APAC decreased from **USD 297 million** to **USD 287 million**; after adjusting for non-underlying items, normalized profit attributable was **USD 297 million**, slightly below **USD 300 million** last year; basic EPS was **2.18 cents**, and normalized basic EPS was **2.26 cents**, largely flat compared to **2.27 cents** last year Table 4. Normalized Profit Reconciliation (USD million) | Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Profit Attributable to Equity Holders of Budweiser APAC | 287 | 297 | | Add: Non-underlying Items (after tax) | 10 | 3 | | Normalized Profit Attributable to Equity Holders of Budweiser APAC | 297 | 300 | Table 5a. Basic Earnings Per Share (cents) | Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Basic Earnings Per Share | 2.18 | 2.25 | | Normalized Basic Earnings Per Share | 2.26 | 2.27 | [Reconciliation of Non-IFRS Measures](index=8&type=section&id=Reconciliation%20of%20Non-IFRS%20Measures) [Normalized EBITDA Reconciliation](index=8&type=section&id=Normalized%20EBITDA%20Reconciliation) This section details the reconciliation from IFRS-based 'Profit Attributable to Equity Holders of Budweiser APAC' to 'Normalized EBITDA', a key management performance metric; in Q1 2024, Normalized EBITDA was **USD 572 million**, adjusted from **USD 287 million** profit by adding income tax, finance costs, depreciation, and amortization Table 6. Normalized EBITDA and Profit Attributable Reconciliation (USD million) | Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Profit Attributable to Equity Holders of Budweiser APAC | 287 | 297 | | Add: Non-controlling Interests | 6 | 8 | | Add: Income Tax Expense | 117 | 115 | | Less: Net Finance Income | (14) | (2) | | Add: Profit Before Tax Plus Non-underlying Items | 13 | 4 | | **Normalized Profit Before Tax** | **408** | **418** | | Add: Depreciation, Amortization and Impairment | 164 | 162 | | **Normalized EBITDA** | **572** | **580** | [Appendices](index=12&type=section&id=Appendices) [Appendix I: Organic Growth Calculation](index=12&type=section&id=Appendix%20I%3A%20Organic%20Growth%20Calculation) This appendix illustrates how organic growth data, used for performance analysis, is calculated from Q1 2023 reported results by excluding scope changes and currency translation impacts; in Q1 2024, currency translation had a **USD 63 million** negative impact on revenue and a **USD 24 million** negative impact on Normalized EBITDA Organic Growth Calculation (USD million) | Item | Q1 2023 Reported | Scope | Currency Translation | Organic Growth | Q1 2024 Reported | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,702 | 10 | (63) | (6) | 1,643 | | Normalized EBITDA | 580 | (8) | (24) | 24 | 572 | [Appendix II: Segment Information](index=13&type=section&id=Appendix%20II%3A%20Segment%20Information) This appendix presents key financial data by geographic segment (APAC East and West); APAC West is the primary revenue and profit source, contributing **USD 1,352 million** in revenue and **USD 486 million** in Normalized EBITDA in Q1 2024, while APAC East's Normalized EBITDA margin improved from **26.1%** to **29.6%** Segment Performance (Q1 2024) | Item (USD million) | APAC East | APAC West | Total | | :--- | :--- | :--- | :--- | | Revenue | 291 | 1,352 | 1,643 | | Normalized EBITDA | 86 | 486 | 572 | | Normalized EBITDA Margin | 29.6% | 35.9% | 34.8% | [Appendix III: Organic and Reported Growth Figures](index=14&type=section&id=Appendix%20III%3A%20Organic%20and%20Reported%20Growth%20Figures) This appendix compares organic and reported growth rates, visually demonstrating the impact of currency fluctuations on various metrics; for instance, Budweiser APAC's total revenue had an organic growth rate of **-0.4%**, while its reported growth rate, considering exchange rate impacts, was **-3.5%** Q1 2024 Growth Rate Comparison | Metric | Budweiser APAC (Organic) | Budweiser APAC (Reported) | China (Organic) | China (Reported) | | :--- | :--- | :--- | :--- | :--- | | Volume | -4.8% | -4.3% | -6.2% | -6.2% | | Revenue | -0.4% | -3.5% | -2.7% | -6.5% | | Normalized EBITDA | 4.2% | -1.4% | 1.0% | -3.2% | [Other Information](index=4&type=section&id=Other%20Information) [Sustainability](index=4&type=section&id=Sustainability) The company made significant sustainability progress, achieving over **25% carbon reduction** across its entire value chain in China, two years ahead of its 2025 climate action target, and showcased efforts in eco-friendly packaging and supplier low-carbon transition as an official partner of Shanghai Climate Week - The company achieved its 2025 climate action target in China **two years ahead of schedule**, with over **25% carbon reduction** across its entire value chain[12](index=12&type=chunk) [About the Company & Conference Call](index=11&type=section&id=About%20the%20Company%20%26%20Conference%20Call) Budweiser APAC is the largest beer company in the Asia Pacific region, leading in premium and super-premium beer with over 50 brands including Budweiser, Stella Artois, and Corona; a conference call to discuss quarterly results is scheduled for May 8, 2024, at 11:30 AM HKT - The company is the **largest beer company in the Asia Pacific region**, operating in key markets including China, South Korea, and India, and listed on the **Hong Kong Stock Exchange (Stock Code: 1876)**[34](index=34&type=chunk) - The earnings conference call is scheduled for **Wednesday, May 8, 2024, at 11:30 AM HKT**[33](index=33&type=chunk)

Investment Rating - The report maintains an "Outperform" rating for Budweiser APAC, indicating an expected price increase of 10-20% in the next six months [2]. Core Insights - The company reported a revenue of USD 6.856 billion in 2023, reflecting a year-on-year growth of 11.1% on an organic basis, while net profit decreased by 7% to USD 852 million [4]. - The report highlights the strong growth potential in the high-end product segment in the Chinese market, driven by a structural upgrade, while the Korean market faces competitive pressures [4][5]. - The forecast for net profit from 2024 to 2026 is adjusted to USD 1.028 billion, USD 1.165 billion, and USD 1.293 billion, respectively, with expected growth rates of 21%, 13%, and 11% [4]. Financial Performance Summary - In 2023, Budweiser APAC achieved a beer sales volume of 9.2767 million tons, a 4.6% increase year-on-year, with revenue per ton rising to USD 739, up 6.2% [4]. - The EBITDA for 2023 was USD 2.023 billion, a 4.7% increase, with an EBITDA margin of 29.5%, slightly down by 0.3 percentage points [4]. - The company plans to continue expanding its distribution of high-end products, with a total of 220 cities in China and 63 cities for ultra-premium products by the end of 2023 [4].

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876 HK) with a target price of HK$18.90, indicating a potential upside of 73% from the current price of HK$10.94 [1][2]. Core Insights - The report highlights that high sales base from 1Q23 in the China and Korea markets may pressure Budweiser APAC's sales performance in 1H24, but the overall outlook for the year remains unchanged [4][5]. - Management expects a high single-digit growth in average selling prices in 1Q24, which will drive further gross margin expansion and maintain normalized EBITDA margin year-on-year [4][5]. - The report emphasizes that despite potential short-term challenges, the company's product upgrade strategy remains intact, and net profit is expected to accelerate in the second half of 2024 [5][6]. Financial Summary - Revenue projections for 2024E are set at US$7,116 million, with a year-on-year growth of 3.8%, while 2025E revenue is projected at US$7,631 million, reflecting a 7.2% increase [6][8]. - The expected EPS for 2024E is US$0.08, with a growth forecast to US$0.09 in 2025E and US$0.10 in 2026E [1][6]. - The report provides a detailed financial outlook, including a projected EBITDA of US$1,525 million for 2024E, increasing to US$1,758 million in 2025E [6][7]. Market Performance - The report notes that Budweiser APAC's stock has a current market capitalization of US$18,502 million, with a three-month average daily trading volume of US$28 million [2][4]. - The stock's price-to-earnings (P/E) ratio is projected at 30.1 times for 2024, which is lower than the historical average P/E over the past three years [5][6]. Sales Performance - The report anticipates a 3% year-on-year decline in sales volume for 1Q24, primarily due to the high sales base from 1Q23, with specific declines of 4.4% in Eastern Asia and 2.9% in Western Asia [4][5]. - The average selling price is expected to increase by 6.2% in 1Q24, contributing to a gross margin expansion of 0.9 percentage points [5][6].

Financial Performance - Revenue increased by 11.1% to $6,856 million, with total sales volume growing by 4.6% to 92,767 million liters[10] - Gross profit rose by 12.4% to $3,453 million, with gross margin improving by 59 basis points to 50.4%[10] - Normalized EBITDA grew by 10.8% to $2,023 million, with a slight decline in EBITDA margin by 7 basis points to 29.5%[10] - Normalized EBIT increased by 15.2% to $1,369 million, with EBIT margin improving by 72 basis points to 20.0%[10] - Total sales volume increased by 4.6% to 9,276.7 million liters in FY2023, driven by growth in China and India[11][19] - Revenue grew by 11.1% to $6,856 million in FY2023, with a 6.2% increase in revenue per hectoliter, supported by premiumization in China and India[11][20] - Normalized EBITDA increased by 10.8% to $2,023 million in FY2023, with a margin decline of 7 basis points to 29.5%[11] - Net cash position increased by $683 million to $3.1 billion at the end of FY2023, with a proposed dividend of $701 million, up 40% from FY2022[12] - Net profit attributable to equity holders of Budweiser APAC decreased from $913 million in FY2022 to $852 million in FY2023, primarily due to non-basic tariff provisions in Korea. Normalized net profit attributable to equity holders increased from $859 million in FY2022 to $917 million in FY2023[23] - Normalized EBITDA increased by 10.8% in FY2023, driven by revenue growth and premiumization in China. However, the normalized EBITDA margin decreased by 7 basis points[24] - Cash and cash equivalents increased from $2,458 million in FY2022 to $3,141 million in FY2023. Operating cash flow rose from $1,577 million in FY2022 to $1,811 million in FY2023, driven by improved EBITDA and working capital management[29] - Investment cash outflow increased slightly from $440 million in FY2022 to $447 million in FY2023, mainly due to reduced proceeds from the sale of property, plant, and equipment, offset by increased deposits in the Budweiser Group cash pool[30] - Financing cash outflow increased from $500 million in FY2022 to $621 million in FY2023, primarily due to higher dividend payments and share buybacks, partially offset by net proceeds from borrowings[31] - Total debt increased from $232 million in FY2022 to $351 million in FY2023, with $246 million due within one year, $43 million due in 1-2 years, $51 million due in 2-5 years, and $11 million due in over 5 years[33] - The company's distributable reserves as of December 31, 2023, amounted to $44,775 million, with approximately $701 million recommended for the final dividend for the year[158] - The company proposed a final dividend of 5.29 cents per share for the year ended December 31, 2023, totaling approximately $701 million, subject to shareholder approval[156] - The company's dividend policy aims to distribute a minimum of 25% of the group's consolidated profit attributable to equity holders, excluding special items[155] Premiumization and Market Growth - Premium and super-premium beer revenue in China and India achieved double-digit growth, driving overall revenue and profit growth[3] - In India, premium and super-premium beer revenue also saw double-digit growth, outperforming the industry[4] - In China, sales volume grew by 4.3% in FY2023, with market share increasing by 69 basis points, and revenue per hectoliter rising by 8.1%[14][15] - In India, the company outperformed the industry with double-digit growth in premium and super-premium product revenues in FY2023[16] - In Q4 2023, China's revenue grew by 11.1% despite a 3.1% decline in sales volume, driven by premiumization and channel recovery[14] - The company expanded its distribution network in China, increasing the number of cities for Budweiser from 201 to 220 and for super-premium products from 51 to 63 in FY2023[15] - The BEES platform contributed approximately 70% of China's December 2023 revenue, expanding to around 260 cities[15] - The company aims to accelerate growth in the super-premium category in China, which is a key profit pool and growth driver in the beer industry[41] - In Korea, the company plans to leverage its core product strengths to unlock further premiumization potential, as the market remains below benchmarks compared to other developed markets[41] - The company is expanding its premium and super-premium business in Southeast Asia while exploring suitable M&A opportunities and partnerships to accelerate growth[41] Sustainability and Environmental Initiatives - Carbon emissions intensity across the value chain decreased by 23.8% compared to the 2017 baseline, and water usage per hectoliter of beer reduced by 32.1% to 2.03 hectoliters per hectoliter[4] - The company achieved a 23.8% reduction in carbon emission intensity per hectoliter across its value chain compared to the 2017 baseline[45] - The company reduced water usage in beer production to 2.03 hectoliters per hectoliter in the Asia-Pacific region, a 32.1% decrease compared to the 2017 baseline[46] - 64.8% of total beer sales use recyclable packaging or primarily use recycled materials, with 54.4% of the main packaging containing recycled materials[47] - The barley project in India supports over 2,600 growers, with a 50% increase in local barley harvest in China, benefiting 5,000 growers and covering 8,000 hectares of farmland[48] - The company replenished nearly 20 million hectoliters of water to communities in China, with a water replenishment rate of 199% in India[48] - The company has deployed 401 green trucks in its fleet, a 9% increase compared to 2022, as part of its green logistics strategy[45] - The company supported five projects through the Sustainable 100+ Accelerator and inspired 117 enterprises through the Asia-Pacific 100+ Innovation Center[51] Corporate Governance and Leadership - The company employs approximately 25,000 staff from 25 different nationalities, and was awarded the Best Employer Award for the third consecutive year in China, South Korea, and India[4][7] - The company's corporate governance framework emphasizes transparency, accountability, and adherence to the highest standards, with a focus on long-term shareholder value[53][57] - The Board of Directors is responsible for overseeing the company's corporate governance, including compliance with governance codes and the development of governance policies[57] - The company's management committees, including the Risk Committee and Sustainability Committee, are tasked with implementing sustainability goals and monitoring compliance with environmental and social standards[59] - The Board of Directors consists of seven members, including executive and non-executive directors, with a focus on maintaining a balanced and effective governance structure[61] - Non-executive Director Deng Mingxiao was appointed as CEO of Budweiser Group in 2021, with extensive experience in leading operations in Latin America, Asia-Pacific, and North America[66] - Katherine Barrett Beimdiek serves as the Global General Counsel of Budweiser Group, overseeing legal and labor relations in the U.S. since 2000[67][68] - Nelson Jamel, with over 20 years at AB InBev Group, has held key financial roles in Brazil, the Dominican Republic, Western Europe, and North America, and currently serves as Global Chief People Officer[68][69] - John Blood, appointed as Alternate Director in 2020, is the Global Chief Legal Officer and Corporate Affairs Officer at Budweiser Group, with a background in legal and corporate affairs[70][71] - David Almeida, appointed as Alternate Director in 2020, is the Chief Strategy and Technology Officer at Budweiser Group, with a strong background in mergers, acquisitions, and sales[72][73] - Independent Non-executive Director Guo Peng has extensive experience in finance and corporate development, having served as Group Finance Director at Swire Pacific Limited and CEO of Swire Properties[74][75][76] - Independent Non-executive Director Marjorie Yang holds significant roles in various organizations, including Chairperson of Esquel Group and Independent Non-executive Director of Meituan[77][78] - Marjorie Yang has served as a director at HSBC Holdings and Swire Pacific Limited, bringing extensive corporate governance experience[79] - The Board of Directors consists of 7 members, with 3 being female, representing 42.9% of the Board[83] - 41% of the company's employees are female as of December 31, 2023[85] - The company aims to maintain female representation on the Board at no less than the current level and not below the requirements of the listing rules[83] - The Board emphasizes diversity in gender, age, cultural and educational background, race, professional experience, skills, and knowledge to enhance decision-making quality[83] - The company has a global succession planning process to ensure business continuity and stability, focusing on gender diversity and internal talent development[84] - The Board includes members with extensive experience in the food and beverage industry, sustainability, risk management, strategy, financial expertise, talent management, and Asia-Pacific regional knowledge[87] - The company has deviated from the Corporate Governance Code by having co-chairmen and a CEO role combined, believing it enhances Board efficiency[88] - The company's co-chairmen and CEO have established a close working relationship, with clear delineation of responsibilities outlined in the Corporate Governance Charter[88] - The company's succession plan aims to develop and prepare internal talent for key leadership roles, ensuring a strong pipeline of future leaders[84] - The company's Board diversity policy is reviewed annually, with the Nominating Committee monitoring its implementation and effectiveness[83] - The company held 4 board meetings, 8 board committee meetings, and 1 annual general meeting during the reporting period[92] - All directors attended at least 3 out of 4 board meetings, with some attending all 4 meetings[93] - Directors participated in professional development activities, including training, company events, and expert briefings[94] - The company conducted a detailed, confidential written questionnaire to evaluate board and committee performance[96] - At least one-third of directors must retire by rotation at each annual general meeting, with all directors eligible for re-election[97] - No director held more than 5 listed company directorships, including the company, as of December 31, 2023[98] - Directors are required to declare any conflicts of interest and abstain from voting on related resolutions[99] - The Board consists of three independent non-executive directors, accounting for 43% of the Board members, who are independent of each other and the senior management team[101] - The Audit and Risk Committee is chaired by an independent non-executive director and consists of three members, including Mr. Guo Peng (Chairman), Ms. Tsang King Shuen, and Mr. Nelson Jamel[108] - The Audit and Risk Committee held four meetings during the year, during which it met with the independent external auditor without the presence of senior management[109] - The Audit and Risk Committee closely collaborates with the independent external auditor and management group functions, inviting senior management members to attend meetings as needed[110] - The company's independent external auditor, PricewaterhouseCoopers, provided both audit and non-audit services during the year, with fees included in Note 9 of the consolidated financial statements[106] - The company held its 2023 Annual General Meeting entirely electronically, allowing directors, senior management, and shareholders to participate online and vote in real-time[107] - The Board and Nomination Committee regularly review and report on the independence of the Board, ensuring that independent opinions and inputs are provided to the Board[100] - The company has established its own Code of Conduct for Securities Transactions, which is no less stringent than the standard code, and all directors confirmed compliance during the year[104] - The Board is responsible for preparing and presenting the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS)[105] - The Nomination Committee reviews the time commitment of each director to the group's business annually[102] - The Audit and Risk Committee reviewed the company's financial statements, interim and annual reports, and key audit matters raised by the independent external auditor for the year ended December 31, 2023[111] - The company's internal control, risk management, tax, legal, compliance, data privacy, IT, cybersecurity, safety, environmental, and quality updates were reviewed by the Audit and Risk Committee[111] - The Nomination Committee reviewed and recommended the succession plans for the Board, Executive Committee, and senior management, and approved the re-election of directors at the 2023 Annual General Meeting[113] - The Remuneration Committee reviewed the 2023 remuneration report and the achievement of targets and remuneration structure for directors, the Executive Committee, and senior management for the years ended December 31, 2022, and 2023[116] - The Remuneration Committee recommended the grant of restricted share units and restricted shares to the CEO and other eligible employees under the share-based compensation plan in March 2023, considering their target achievements and other recommendations from senior management[116] - The Remuneration Committee recommended the grant of restricted share units to certain directors and eligible employees under a new restricted share unit plan in December 2023, aligning with the company's strategic goals and past achievements[116] - The company's remuneration policy for directors includes fixed fees and securities, ensuring a simple and transparent structure that is easily understood by shareholders[117] - The Board periodically sets and revises the remuneration rules and levels for directors with special authorizations or committee memberships, as well as rules for reimbursing directors' business-related expenses[118] - The current senior management team includes CEO Mr. Yang Ke, CFO Mr. Ignacio Lares, and Chief Legal and Corporate Affairs Officer Mr. Craig[119] - The Executive Committee, consisting of the CEO, CFO, and Chief Legal and Corporate Affairs Officer, collaborates with the Board to handle corporate governance and execute company strategies[120] - The Risk Committee is responsible for reviewing risks at the enterprise level, assessing risk appetite, and overseeing the risk management framework, policies, and systems[121] - The Sustainability Committee oversees internal and external sustainability measures, monitors compliance with environmental and social laws, and identifies climate-related risks and opportunities[122] - The Sustainability Committee conducts scenario analysis and workshops to identify key climate-related risks and opportunities in the Asia-Pacific region[123] - The Ethics and Compliance Committee is responsible for developing compliance policies, managing internal policy adherence, and promoting compliance awareness through training[124] - The Board and senior management are responsible for establishing and maintaining effective internal control, internal audit, and risk management systems[125] - The company has established a robust, comprehensive, and technology-driven risk management system to effectively manage and mitigate inherent business risks, protecting the company, customers, and partners while fulfilling regulatory obligations[132] - The company conducts annual risk assessments using a bottom-up and top-down approach, involving key internal and external stakeholders, to prioritize and address risks[132] - The company has implemented a three-level control framework to manage operational, financial compliance, and legal compliance risks, with each level having distinct scopes and focuses[127][128][129][130] - The company's internal control system is based on the COSO Internal Control - Integrated Framework (2019) and the COSO Enterprise Risk Management Framework (2019)[127] - The company's risk management and internal audit teams review the effectiveness of control systems annually and collaborate with business process owners to implement improvements[130][132] - The company has adopted an insider information disclosure policy to regulate the handling and dissemination of insider information, strictly prohibiting the use of confidential or insider information for securities trading[133] - The company's board of directors, with the assistance of the audit and risk committee, reviews the effectiveness of internal audit, internal control, and risk management systems, including financial, operational, and compliance controls[134] - The company identifies economic conditions and the beer industry as major risk areas, with potential impacts from adverse economic developments in the Asia-Pacific region, including fluctuations in commodity prices, logistics costs, and product sales[136] - The company closely monitors and reviews commodity prices, logistics efficiency, and product sales and distribution in key markets, and may make commercial investments and resource allocations to support its brands and marketing channels in adverse economic conditions[136] - The company faces political and regulatory risks in developing countries, including political instability, external interference, financial risks, and government policy changes[137] - The company has established three management committees (Sustainability Committee, Risk Committee, and Compliance Committee) to oversee compliance with sustainability-related policies[137] - The company's business is closely related to the natural environment, relying on high-quality agricultural products, packaging materials, water resources, and energy for beer production[138] - The company competes with global and regional beer brewers and other beverage companies, primarily in brand image, price, quality, distribution network, and customer service[139] - The company continuously evaluates consumer needs and values to determine the main characteristics of consumers in each beer category, aiming to position existing brands or introduce new brands accordingly[139] - The company is increasing investment in the Asia-Pacific Innovation Technology Center, which includes research pilot breweries, packaging laboratories, central laboratories, regional R&D offices, and training centers[139] - The company faces cybersecurity risks, such as cyberattacks and phishing, which may disrupt major business operations and manufacturing activities[139] - The company has implemented strict cybersecurity and data privacy policies and procedures, conducting regular training and workshops[139] - The company relies on the reputation of its brands, and any event that severely damages the reputation of one or more brands could adversely affect the company's revenue[140] - The company has established a minimum counterparty credit rating and only transacts with financial institutions with investment-grade credit ratings to mitigate financial risks[140] - The company operates a 24/7/365 whistleblower hotline managed by an independent third party, supporting multiple languages for confidential and anonymous reporting of policy violations[142] - The company has a zero-tolerance policy towards bribery and corruption, with a leading anti-corruption compliance program managed by the Ethics and Compliance Committee[143] - Regular training on the Code of Business Conduct and anti-corruption is provided to employees, including interactive animations and live sessions[144] - Shareholders holding at least 10% of the company's paid-up share capital can request a special general meeting, which must be held within two months of the request[145] - The company has adopted a procedure for nominating candidates for the board of directors, available on the company's website[146] - The company's Articles of Association were last amended and restated on May 6, 2022, with no

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC with a target price of HK$18.90, down from HK$22.30, indicating a potential upside of 39% from the current price of HK$13.58 [1][5][10]. Core Insights - Budweiser APAC achieved a solid performance in 2023 despite a challenging environment, with organic revenue growth of 11.1% and normalized net profit growth of 6.8% to US$917 million [5][9]. - The company is focusing on a premiumization strategy, which is expected to drive both average selling prices and profit margins upward [5][6]. - The outlook for 2024 is positive, with stable growth anticipated in the Chinese market and continued recovery in South Korea [5][6]. Financial Summary - Revenue for 2023 was US$6,856 million, with a projected increase to US$7,116 million in 2024 and US$7,631 million in 2025 [7][14]. - The normalized net profit for 2023 was US$917 million, expected to rise to US$1,061 million in 2024 and US$1,224 million in 2025 [7][14]. - The earnings per share (EPS) for 2023 was US$0.07, projected to increase to US$0.08 in 2024 and US$0.09 in 2025 [7][14]. Market Performance - The company reported a volume growth of 4.6% in 2023, with expectations of a slight increase of 1.1% in 2024 [8][9]. - The average selling price in 2023 was US$739, with a forecasted increase to US$758 in 2024 and US$793 in 2025 [8][10]. - The gross margin for 2023 was 50.4%, expected to improve to 51.6% in 2024 and 53.0% in 2025 [8][10]. Strategic Focus - Budweiser APAC is committed to its high-end product strategy, which has led to a significant increase in the sales volume of premium products [5][6]. - The management's assessment of the Chinese market performance has alleviated investor concerns regarding price competition, with a focus on premiumization continuing to gain traction [5][6]. - The company has implemented price increases in the South Korean market, which is expected to enhance average selling prices and profit margins in 2024 [6][9].