BUD APAC(HK:01876)2024-03-04 16:00Investment 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].