BUD APAC(01876) 浦银国际证券·2024-11-01 08:43Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876.HK) with a target price of HKD 9.85, indicating a potential upside of 21.5% from the current price of HKD 8.11 [4][21]. Core Views - Short-term performance is expected to be challenging due to a decline in consumer spending in the Chinese beer market, with a projected 9.4% year-on-year decrease in overall organic revenue for Q3 2024, driven by an 11.4% drop in sales volume [2][10]. - Despite short-term difficulties, the long-term outlook remains positive due to Budweiser APAC's strong product and brand mix in the premium and super-premium segments, which could provide significant earnings elasticity as consumer spending recovers [2][11]. - The company's current valuation is considered attractive, and its strong management capabilities and backing from AB InBev enhance its appeal to foreign investors [2][11]. Summary by Sections Financial Performance - For Q3 2024, Budweiser APAC reported a 9.4% decline in organic revenue, with sales volume down 11.4% and a slight average price increase of 2.2% [2][10]. - The normalized EBITDA decreased by 16.6% year-on-year, reflecting the negative operating leverage from the significant revenue drop [10][11]. - The company anticipates that the downward trend in revenue and EBITDA will likely continue into Q4 2024 [2][11]. Market Analysis - In the Chinese market, Q3 2024 sales volume fell by 14.2%, attributed to a higher proportion of on-premise sales channels, which were more adversely affected than off-premise channels [2][11]. - The management noted that there has been no significant impact from policy stimulus on beer demand in Q4 2024, suggesting continued pressure on sales and average pricing [2][11]. - Conversely, the South Korean market showed resilience with a double-digit year-on-year growth in organic revenue for Q3 2024, driven by price increases and improved product mix [12][11]. Financial Projections - Revenue projections for Budweiser APAC are expected to decline to USD 6.245 billion in 2024, a decrease of 8.9% year-on-year, with a gradual recovery anticipated in subsequent years [3][18]. - The net profit is projected to drop to USD 700 million in 2024, reflecting a significant year-on-year decline of 17.8% [3][18]. - The report highlights a low price-to-earnings (PE) ratio of 19.6x for 2024, which is expected to improve to 15.3x by 2025, indicating potential for valuation recovery [3][18].