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].

Investment Rating - The investment rating for Budweiser Brewing Co APAC has been downgraded to "Neutral" [3][13]. Core Views - The report indicates that while revenue for Q4 2023 met expectations, overall performance was slightly below expectations, with a year-on-year revenue increase of 5.8% and a net profit decrease of 6.7% [9][12]. - The company is experiencing a decline in sales volume in the Korean market, with market share estimated to have decreased by approximately 150 basis points [11][12]. - The report highlights a significant increase in average price per ton, contributing to improved gross profit margins, but also notes that profit margins have been impacted by tax fluctuations [12][13]. Financial Performance Summary - For 2023, the company achieved revenue of $6.856 billion, with a sales volume of 92.77 million hectoliters and an EBITDA of $2.023 billion [9][10]. - The fourth quarter alone saw revenue of $1.293 billion, with a year-on-year increase of 11.0%, while sales volume increased by only 0.6% [9][10]. - The projected EPS for 2024-2026 is revised to 0.63, 0.71, and 0.77 HKD respectively, reflecting a downward adjustment due to short-term consumption pressures [13][12]. Market Insights - In the China region, sales volume decreased by 3.1% while prices increased by 14.7%, indicating a shift in consumer behavior and product mix [10][11]. - The Indian market continues to show double-digit revenue growth, primarily driven by high-end and ultra-premium products [10][11]. - The Asia Pacific East region's profit margins have declined by 3.2 percentage points, with revenue growth hindered by competitive pressures and high base effects from the previous year [11][12].

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876.HK) and identifies it as a sector favorite [5][22]. Core Views - Budweiser APAC's 4Q23 EBITDA growth exceeded expectations, driven by a significant increase in sales price, resulting in a 31.3% year-on-year increase in normalized EBITDA [5]. - The company is expected to outperform its peers in 2024 due to several factors, including continued premiumization in product offerings in China, sustained price increases in Korea, reduced raw material cost pressures, and ongoing cost control measures [5]. - The report highlights the strong brand matrix in the premium segment, which positions Budweiser APAC favorably against other Chinese beer players, especially given its lower valuation compared to peers [5]. Summary by Sections Financial Performance - 4Q23 sales price increased by 14.7% year-on-year, significantly higher than other Chinese beer players [5]. - The company reported a net profit of $852 million in 2023, with a projected increase to $1,089 million in 2024, reflecting a year-on-year growth of 27.9% [11][19]. - Revenue is expected to grow from $6,856 million in 2023 to $7,180 million in 2024, a 4.7% increase [11][19]. Market Trends - The report notes a strong demand for premium and super-premium beer products among high-income consumers in China, while lower-income consumers are becoming more cautious in their beer consumption [5]. - Budweiser APAC's lower exposure to mass-market products (less than 60% of sales) mitigates the impact of consumption downgrades in the mass market [5]. Valuation - Budweiser APAC's 2024 EV/EBITDA is projected at 8.2x, below the industry average of 9.6x, indicating a significant undervaluation [5]. - The target price for Budweiser APAC is set at HKD 16.7, representing a potential upside of 29.3% from the current price of HKD 12.9 [6][22]. Regional Performance - In Korea, Budweiser APAC experienced a 23.2% year-on-year increase in normalized EBITDA in 4Q23, attributed to successful price increases [5]. - Despite uncertainties in the Korean market, the report anticipates a substantial expansion in EBITDA margin for 2024 due to the effects of previous price increases and a favorable comparison to last year's lower EBITDA base [5].

M N 1 Mar 2024 CMB International Global Markets | Equity Research | Company Update Budweiser APAC (1876 HK) 4Q23 a slight miss; S. Korea undershoot Target Price HK$14.5 Stripping off mainly the US$66mn tax provision, Bud APAC 4Q results came in (Previous TP HK$16.9) c.3%/6% below us/consensus. Operations in South Korea (esp. home channel) Up/Downside 14.2% looked increasingly challenging upon the return of Japanese brands, with Current Price HK$12.7 volume consecutively edging down by MSD% since 3Q23 (1H23: ...

Investment Rating - The report maintains a rating of "Buy" for Budweiser APAC (1876.HK) [5] Core Views - The company achieved a revenue of USD 6.856 billion in 2023, with a year-on-year growth of 5.8%. The EBITDA for the same period was USD 2.030 billion, reflecting a year-on-year increase of 4.9% [5][9] - The company is focusing on high-end product development, with significant price increases in key markets, particularly in Asia [6][7] - The report highlights the impact of a non-recurring tax audit claim in South Korea, which resulted in an expense of approximately USD 66 million, affecting net profit [6][7] Financial Performance - In 2023, Budweiser APAC's total sales volume was 9.2767 million kiloliters, with a year-on-year growth of 4.6%. The average price per ton of beer increased by 6.2% for the year [6] - The company reported a gross margin of 50.4% for the full year 2023, with an EBITDA margin of 29.5% [6][9] - The revenue and EBITDA for Q4 2023 were USD 1.293 billion and USD 266 million, respectively, with year-on-year growth rates of 8.9% and 31.3% [5][6] Regional Performance - In the Western Asia region, Q4 2023 revenue and EBITDA grew by 9.2% and 35.7% year-on-year, despite a slight decline in sales volume [6] - The Eastern Asia region saw a revenue and EBITDA increase of 7.7% and 23.2% year-on-year, with a sales volume decline of 3.4% [6] - The Chinese market showed strong performance in high-end products, with revenue growth of 11.1% and EBITDA growth of 44.4% in Q4 2023 [7] Future Outlook - The company plans to expand its distribution channels in China, increasing the number of cities for Budweiser distribution from 220 to 235 by the end of 2024 [7] - The report projects a decrease in net profit for 2024 and 2025 to USD 1.040 billion and USD 1.176 billion, respectively, due to ongoing challenges in the South Korean market [8][9] - The estimated P/E ratios for 2024, 2025, and 2026 are 21x, 19x, and 17x, respectively, indicating a favorable valuation for long-term investors [8]

Investment Rating - The report maintains a "Buy" rating for Budweiser Brewing APAC (1876 HK) with a target price raised to HKD 15.60, indicating a potential upside of 23.0% from the current closing price of HKD 12.68 [1][2][4]. Core Insights - The fourth quarter performance slightly missed expectations, but the premiumization of beer has shown unexpected resilience. The sales for 2023 met expectations with a year-on-year growth of 5.8%, while normalized net profit grew by 7% to USD 917 million, which was 4% below consensus estimates [1][5]. - The gross margin increased by 35 basis points due to a 6.2% rise in revenue per hectoliter outpacing a 5.0% increase in costs per hectoliter. The commodity prices have shifted from headwinds to mild tailwinds since 2024 [1][5]. - The dividend per share increased by 40% year-on-year, with a payout ratio rising to 82% from 58% in 2022, which is a positive surprise. Future payout ratios are expected to remain at 75% or above [1][5]. Summary by Sections Financial Performance - For 2023, sales reached USD 6.856 billion, reflecting a 5.8% year-on-year increase. The normalized net profit was USD 917 million, with a year-on-year growth of 6.8% [2][5]. - The EBITDA for 2023 was USD 2.023 billion, showing a 4.7% increase compared to the previous year [5][10]. - The average selling price in the Asia Pacific region increased by 11%, while sales volume decreased by 2% [1][5]. Regional Insights - In the Western Asia Pacific region, premium beer showed more resilience than core/value beer, with average selling price/sales volume/sales revenue growth of 11%/-2%/9% respectively in Q4 2023. The strong growth in high-end and super-premium brands was driven by channel recovery and geographic expansion [1][6]. - In the Eastern Asia Pacific region, competition from Japanese brands has led to a decline in sales volume in South Korea, with average selling price/sales volume/sales revenue growth of 11%/-3%/8% respectively in Q4 2023 [1][6]. Future Outlook - The report emphasizes that the premiumization trend in Chinese beer is structural and can withstand macroeconomic cycles. Budweiser is well-positioned to capture a significant share of market growth [1][5]. - The target price adjustment reflects a shift in the earnings per share valuation from 2024 to an average of 2024-25, maintaining a price-to-earnings ratio of 22 times, based on a compound annual growth rate of 17% for earnings per share from 2024 to 2026 [1][5].

Core Viewpoint - Morgan Stanley has issued a research report maintaining an "Overweight" rating for Budweiser APAC (01876) with a target price of HKD 18.6, highlighting the company's strong sales performance in Q4 of the previous year, which exceeded both the bank's and market expectations [1] Financial Performance - In Q4, Budweiser APAC's EBITDA met expectations, while net profit slightly fell short due to higher tax rates [1] - For the fiscal year 2023, the average selling price of products increased by 6.2%, and sales volume grew by 4.6% [1] - The company's sales in the Chinese market for fiscal year 2023 rose by 12.8%, with sales volume increasing by 4.3%, aligning with industry growth [1] Market Position - Budweiser APAC outperformed its Chinese peers, driven by robust growth in its premium product segment [1] - In the mainland market, the average selling price naturally increased by 8.1% [1] Dividend Information - For the fiscal year 2023, the company declared a dividend of 5.29 US cents per share, with a payout ratio of 82%, compared to 3.78 US cents per share and a payout ratio of 55% in 2022 [1]

Financial Performance - For the fiscal year 2023, revenue increased by 11.1% to $6,856 million, with a reported growth of 5.8% and a revenue per hectoliter growth of 6.2%, driven by premiumization in China and India [3]. - Normalized EBITDA rose by 10.8% to $2,023 million, with a normalized EBITDA margin decreasing by 7 basis points to 29.5%, supported by revenue growth in China [4]. - Normalized profit attributable to equity holders increased from $859 million in 2022 to $917 million in 2023, while profit attributable to equity holders decreased from $913 million to $852 million due to non-basic tariff provisions in Korea [5]. - Total sales volume for the fiscal year 2023 increased by 4.6% to 9,276.7 million liters, primarily supported by growth in China and India [6]. - Sales costs increased by 9.8% to $3,403 million, with a per hectoliter sales cost increase of 5.0%, mainly driven by premiumization and rising commodity costs [7]. - The normalized effective tax rate rose from 30.8% in 2022 to 33.5% in 2023, primarily due to national composition and withholding taxes on dividends [8]. - Normalized earnings per share increased from 6.50 cents in 2022 to 6.94 cents in 2023, while basic earnings per share decreased from 6.91 cents to 6.45 cents [9]. - The total comprehensive income for 2023 was $594 million, down from $136 million in 2022, with net income of $880 million compared to $949 million in the previous year [28]. - Total assets increased to $16,234 million in 2023 from $15,996 million in 2022, representing a growth of 1.5% [31]. - Non-current assets decreased to $11,975 million in 2023 from $12,390 million in 2022, a decline of 3.4% [31]. - Current assets rose significantly to $4,259 million in 2023, up from $3,606 million in 2022, marking an increase of 18.1% [31]. - Cash and cash equivalents increased to $3,141 million in 2023, compared to $2,458 million in 2022, reflecting a growth of 27.7% [31]. - Total equity attributable to owners of Budweiser APAC increased slightly to $10,785 million in 2023 from $10,764 million in 2022, a marginal rise of 0.2% [31]. - Total liabilities increased to $5,384 million in 2023 from $5,163 million in 2022, indicating a rise of 4.3% [33]. - Interest-bearing loans and borrowings rose to $237 million in 2023 from $147 million in 2022, an increase of 60.5% [33]. - The company reported a decrease in inventory to $444 million in 2023 from $488 million in 2022, a decline of 9.0% [31]. - The effective tax rate for 2023 was 34.4%, up from 26.5% in 2022, indicating a significant increase in tax burden [47]. - Other operating income for 2023 was $107 million, down from $141 million in 2022, reflecting a decrease of 24.1% [42]. - The diluted earnings per share (EPS) for 2023 was 6.91 cents, compared to 6.49 cents in 2022, reflecting an increase of 6.46% [50]. - The company reported a normalized basic EPS of 6.94 cents in 2023, compared to 6.50 cents in 2022, marking an increase of 6.77% [51]. Sales and Market Performance - The company reported strong double-digit growth in revenue per hectoliter in Q4 2023, driven by double-digit growth in high-end and super-premium products in China [10]. - In the fiscal year 2023, total sales increased by 4.6%, while revenue and revenue per hectoliter rose by 11.1% and 6.2% respectively [11]. - In China, sales grew by 4.3%, driven by channel recovery and continued premiumization, with double-digit growth in both premium and super-premium product revenues [11]. - In the fourth quarter of 2023, total sales declined by 2.1%, but revenue and revenue per hectoliter increased by 8.9% and 11.2% respectively [12]. - The net cash position increased by $683 million to $3.1 billion by the end of fiscal year 2023 [12]. - In the western Asia-Pacific region, sales decreased by 1.9%, but revenue and revenue per hectoliter increased by 9.2% and 11.3% respectively in Q4 2023 [15]. - For the fiscal year 2023, sales in the western Asia-Pacific region grew by 5.3%, with revenue and revenue per hectoliter rising by 13.4% and 7.7% respectively [15]. - In Q4 2023, sales in China decreased by 3.1%, while revenue grew by 11.1%, with revenue per hundred liters increasing by 14.7% [16]. - For the full year 2023, sales increased by 4.3%, and market share improved by 69 basis points, with total revenue and revenue per hundred liters growing by 12.8% and 8.1% respectively [16]. - The number of distribution cities for Budweiser expanded from 201 in 2022 to 220 by the end of 2023, while the number for super premium products increased from 51 to 63 [16]. - In India, the combined revenue from high-end and super premium products achieved double-digit growth in Q4 2023, maintaining its position as Budweiser's fourth largest global market [18]. - In the Asia Pacific region, Q4 2023 sales decreased by 3.4%, but revenue increased by 7.7%, with revenue per hundred liters growing by 11.4% [19]. - In South Korea, sales showed a mid-single-digit decline in Q4 2023, while revenue experienced low single-digit growth, consistent with a 6.9% price increase [20]. Strategic Initiatives and Future Outlook - The company is well-positioned to drive quality growth and create future value across all major markets [2]. - The company plans to focus on high-quality growth in China, accelerating the expansion of super premium categories, which are seen as the main profit growth driver for the beer industry [22]. - The BEES digital platform in China has expanded to approximately 260 cities, contributing about 70% of the company's revenue in December 2023 [16]. - The company plans to focus on core business efficiency and cost reduction through organizational restructuring [45]. - Future outlook includes potential market expansion and new product development initiatives [39]. Quarterly Performance - Total sales volume for Q4 2023 was 15,667 thousand liters, a decrease of 2.1% compared to Q4 2022 [71]. - Revenue for Q4 2023 reached $1,293 million, representing an 8.9% increase from $1,165 million in Q4 2022 [71]. - Gross profit for Q4 2023 was $617 million, up 15.1% from $534 million in Q4 2022 [71]. - Gross margin improved to 47.7% in Q4 2023, an increase of 261 basis points from 45.8% in Q4 2022 [71]. - Normalized EBITDA for Q4 2023 was $266 million, reflecting a 31.3% increase from $200 million in Q4 2022 [71]. - Normalized EBITDA margin increased to 20.6% in Q4 2023, up 351 basis points from 17.2% in Q4 2022 [71]. - Normalized EBIT for Q4 2023 was $102 million, a significant increase of 144.7% from $41 million in Q4 2022 [71]. - Normalized EBIT margin improved to 7.9% in Q4 2023, an increase of 408 basis points from 3.5% in Q4 2022 [71]. - The company reported a normalized profit attributable to equity holders of $38 million in Q4 2023, compared to a loss of $19 million in Q4 2022 [71]. - The financial data for Q4 2023 is based on internal records and has not been independently reviewed or audited [70].

Investment Rating - The report maintains a "Recommended" rating for Budweiser APAC (01876.HK) with a target price of HKD 18, while the current price is HKD 12.68 [1]. Core Views - The report highlights impressive tonnage prices in China, while tariffs in South Korea are seen as a drag on performance. The company achieved a total revenue of USD 6.856 billion in 2023, with a year-on-year growth of 5.8% [1][11]. - The normalized EBITDA for the year was USD 2.023 billion, reflecting a year-on-year increase of 4.7%. The normalized net profit attributable to shareholders was USD 917 million, showing a growth of 6.8% [1][11]. - The report anticipates continued focus on premiumization and cost benefits to enhance profits in 2024, despite competitive pressures in the South Korean market [1]. Summary by Sections Financial Performance - For Q4 2023, the company reported revenue of USD 1.293 billion, with a year-on-year growth of 11.0%. The normalized EBITDA for Q4 was USD 266 million, marking a significant increase of 33.0% year-on-year [1]. - The normalized net profit for Q4 was USD 38 million, a recovery from a loss of USD 19 million in the same quarter last year [1]. Regional Performance - In the Asia Pacific West region, Q4 saw a decline in total volume in China but strong performance in premium and super-premium products, with tonnage prices increasing by 14.7% [1]. - The Asia Pacific East region faced intense competition, leading to a slight decline in sales volume, but price increases helped turn EBITDA growth positive [1]. Profitability and Cost Management - The report notes that the normalized profit margin remained stable year-on-year, with a normalized net profit margin of 13.4% for 2023. However, non-recurring tax provisions in South Korea negatively impacted overall profitability [1]. - The company expects to benefit from lower costs of barley and aluminum, alongside price increases, to drive profit growth in 2024 [1]. Future Outlook - The report projects a recovery in profits for 2024, with adjusted net profit forecasts of USD 1.074 billion, reflecting a growth of 26.0% year-on-year [1][11]. - The company aims to continue its premiumization strategy and leverage cost advantages to enhance profitability in the coming years [1].