BUD APAC(01876) 浦银国际证券·2024-08-02 07:01Investment Rating - The report assigns a "Buy" rating to Budweiser APAC (1876 HK) with a target price of HKD 11.2, representing a potential upside of 19.1% from the current price of HKD 9.4 [2] Core Views - Despite a significant decline in 2Q24 performance in China due to unfavorable factors, the long-term premiumization trend in the Chinese market remains intact, with expected improvement in volume and price performance in 2H24 due to a low base [1] - Korea's 2Q24 organic revenue and normalized EBITDA showed strong growth, expected to continue in 3Q24 [1] - Budweiser APAC's 1H24 organic cost per ton decreased by 0.6% YoY, leading to a 127bps expansion in organic gross margin, with this trend expected to continue in 2H24 due to a 12-month price lock-in mechanism [1] - The company's flexible cost control measures are expected to keep the full-year expense ratio stable YoY, with normalized EBITDA likely to return to positive growth in 2H24 [1] China Market Analysis - 2Q24 organic revenue in China declined by 15.2% YoY, with volume and organic price per ton down by 10.3% and 5.4% respectively [1] - China's normalized EBITDA fell by 17.2% YoY, slightly higher than the revenue decline, reflecting the company's operational efficiency and cost control flexibility [1] - In 3Q24, volume decline in China is expected to narrow significantly due to improved weather during the peak season and a low base, with price per ton likely to return to positive growth as premium and above products recover [1] - Long-term growth potential lies in expanding distribution channels for premium and above products through the BEES platform and increasing market share in non-on-premise channels [1] Korea Market Analysis - Korea's 2Q24 volume grew by mid-single digits, with price per ton expanding by mid-teens, driving high-teens revenue growth [1] - APAC East's normalized EBITDA surged by 69.6% YoY, with normalized EBITDA margin expanding by 899bps [1] - The strong performance is attributed to a low base from the April 2023 tax hike, two price increases in 2023, improved channel and brand structure, cost control, and lower raw material prices [1] - Market share increased in both on-premise and non-on-premise channels in 2Q24, with continued strong growth expected in 3Q24 if no further tax hikes occur [1] Financial Performance and Forecast - 1H24 revenue declined by 7% YoY to USD 3,399 million, with volume down 6% and price per ton down 2% [8] - Gross margin improved to 51.5% in 1H24 from 50.9% in 1H23, driven by cost control measures [8] - Normalized EBITDA for 1H24 was USD 1,100 million, down 6% YoY, with a margin of 32.4% [8] - Full-year 2024 revenue is forecasted at USD 6,670 million, down 2.7% YoY, with normalized EBITDA expected to grow by 1% to USD 2,049 million [9] - Net profit attributable to shareholders is projected to increase by 2.6% to USD 874 million in 2024, with a net margin of 13.1% [9] Valuation - The SOTP valuation based on 2024E EBITDA suggests a target EV/EBITDA multiple of 8.0x, implying a target price of HKD 11.2 [11] - APAC East and APAC West are valued at EV/EBITDA multiples of 4.0x and 9.0x respectively [11]