Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (01876.HK) with a target price of HKD 10, while the current price is HKD 8.66 [2][6]. Core Insights - The company reported a total revenue of USD 6.246 billion and normalized EBITDA of USD 1.807 billion for the year 2024, reflecting a year-on-year decline of 7.0% and 6.3% respectively. The normalized net profit attributable to shareholders was USD 778 million, showing a decrease of 15.2% [2][7]. - The fourth quarter results showed revenue and normalized EBITDA of USD 1.142 billion and USD 228 million respectively, with a year-on-year decline of 11.0% and 7.2% [2][7]. - The company plans to distribute a dividend of USD 750 million, which is a 7% increase, resulting in a payout ratio of 103.25% [2]. Financial Performance Summary - For the fiscal year 2024, Budweiser APAC's total sales volume decreased by 8.8%, with a significant decline in the Chinese market, where sales volume and price per ton saw year-on-year declines of 11.8% and 1.4% respectively [6][7]. - The company experienced a mixed performance across regions, with the Asia Pacific West region facing challenges while the Asia Pacific East region showed strong growth, particularly in South Korea [6][7]. - The overall gross margin for 2024 was 50.4%, with a slight year-on-year increase of 0.6 percentage points [6][7]. Future Outlook - Looking ahead to 2025, the company aims to prioritize market share recovery and has implemented significant management changes to drive this strategy. The new leadership is expected to bring renewed energy to the company's operations [6][7]. - The company plans to enhance its product offerings and increase marketing expenditures, particularly in key regions such as Fujian and Guangdong [6][7]. - The projected net profit for 2025 is adjusted to USD 815 million, with a corresponding PE ratio of 18 times [6][7].

Investment Rating - The report downgrades Budweiser APAC to "Hold" with a target price of HKD 9.36, reflecting a potential upside of 8.1% from the current price of HKD 8.66 [1][3]. Core Views - The report indicates that the Chinese beer market is unlikely to see significant improvement in demand until 2025, with sales, revenue, and profit margins expected to remain under pressure in the short term [1]. - The company's strategy to focus on high-end and core++ products may not yield immediate benefits, and the high revenue share from ultra-premium products could negatively impact overall sales performance [1]. - Despite having clear product and channel plans for 2025, the ability to translate these into improved performance remains uncertain [1]. - Following a significant stock price increase, the current valuation (19x 2025 P/E) is considered less attractive [1]. Sales and Market Performance - In Q4 2024, Budweiser APAC's sales in China fell sharply by 18.9% year-on-year, worsening from a decline of 14.8% in Q3 2024 [1]. - The company plans to focus on high-end products, particularly the Budweiser brand, while being more selective in investments in ultra-premium brands [1]. - The shift towards high-end family channels may further tilt the channel structure away from on-premise consumption [1]. Regional Insights - In South Korea, Budweiser APAC recorded high single-digit sales and revenue growth in Q4 2024, with management confident that price increases will drive growth and margin recovery [1]. - The company raised prices for high-end and ultra-premium products by 8.1% in November 2024, which is expected to significantly benefit revenue and profit margins in 2025 [1]. Financial Projections - Revenue for 2025 is projected at USD 6.134 billion, a decrease of 1.8% from 2024, with net profit expected to rise to USD 790 million, reflecting an 8.8% increase [7][16]. - The report anticipates EBITDA margins to recover to pre-pandemic levels in the South Korean market, supported by price increases and operational efficiency improvements [1][2].

Investment Rating - The report assigns a "Buy" rating for Budweiser APAC (1876 HK) with a target price of HKD 9.78, indicating a potential upside of 24.7% from the current price of HKD 7.84 [1][2][6]. Core Insights - The overall performance is led by strong results in the South Korean and Indian markets, with an increase in dividend payout ratio reflecting future operational confidence [2][6]. - For 2024, Budweiser APAC reported a revenue of USD 6.246 billion, a decline of 8.9% year-on-year, with normalized EBITDA at USD 1.807 billion, down 10.7% [6][16]. - The company faced challenges in the China market, with a significant drop in sales and revenue due to increased competition and changing consumer behavior [6][16]. - The Indian market showed robust growth, particularly in the premium segment, achieving nearly 20% growth in high-end products and doubling market share over the past five years [6][16]. - The South Korean market performed exceptionally well, with high single-digit sales growth leading to double-digit revenue growth, driven by product mix optimization and market share expansion [6][16]. - The report maintains a positive long-term growth outlook for Budweiser APAC, particularly as consumer spending recovers in China, supported by strong performance in South Korea [6][16]. Financial Overview - Revenue projections for Budweiser APAC show a recovery trend, with expected revenues of USD 6.563 billion in 2025, growing to USD 7.181 billion by 2027 [5][16]. - Net profit is projected to rebound to USD 837 million in 2025, with a further increase to USD 1.067 billion by 2027 [5][16]. - The company’s dividend yield is expected to remain attractive, with a payout ratio increasing to 96% in 2024, up from 82% in 2023 [6][16]. - The report highlights a significant increase in the number of distribution cities to 235, enhancing market reach and operational efficiency [6][8].

Investment Rating - The report maintains an "Outperform" rating for Budweiser APAC [2] Core Insights - Budweiser APAC reported a revenue of USD 6.246 billion for 2024, a year-on-year decline of 7%. The net profit attributable to shareholders was USD 726 million, down 14.8% year-on-year. The company proposed a dividend increase from 5.29 cents per share in 2023 to 5.66 cents in 2024, totaling USD 750 million, with a payout ratio of 103.25% [7] - The report anticipates a recovery in demand in 2025, contingent on improved conditions in the restaurant and nightlife sectors, which could lead to a rebound in beer sales [7] - The company is focusing on expanding its high-end product offerings and increasing its distribution channels, with the number of cities served growing to 235 by the end of 2024 [7] Financial Data and Profit Forecast - Revenue projections for Budweiser APAC are as follows: - 2023: USD 6.856 billion - 2024: USD 6.246 billion - 2025E: USD 6.665 billion - 2026E: USD 6.971 billion - 2027E: USD 7.191 billion - Net profit forecasts are: - 2023: USD 852 million - 2024: USD 726 million - 2025E: USD 788 million - 2026E: USD 838 million - 2027E: USD 881 million - The report indicates a projected PE ratio of 19 for 2025, 18 for 2026, and 17 for 2027 [6][8]

Core Viewpoint - Budweiser APAC reported a significant decline in revenue, sales, and profitability for 2024, indicating challenges in the high-end beer market, particularly in China [1][3][10]. Financial Performance - For 2024, Budweiser APAC achieved revenue of $6.246 billion, down 7% year-on-year, with sales volume of 848.1 million liters, a decrease of 8.8% [1][9]. - Normalized EBITDA was $1.807 billion, reflecting a 6.3% decline compared to the previous year [1][9]. - The company's net profit attributable to shareholders was $726 million, down from $852 million [9]. Market Challenges - The Chinese market showed a significant downturn, with Budweiser's sales volume dropping by 11.8% in 2024, and a notable 18.9% decline in Q4 [10][14]. - The overall beer market in China saw a slight decrease in production, with Budweiser's performance lagging behind competitors like Chongqing Beer and Yanjing Beer [11][10]. Leadership Changes - CEO Jan Craps announced his departure after seven years, with Cheng Yanjun set to take over as CEO and co-chairman [3][17]. - Cheng has extensive experience within the company and aims to leverage his background to drive growth [17][18]. Strategic Focus - The new CEO is tasked with revitalizing growth, particularly by enhancing Budweiser's brand portfolio and marketing strategies in China [17][19]. - Budweiser plans to accelerate the development of non-drinking channels, which have shown potential for growth despite the overall market decline [19][20]. Competitive Landscape - Budweiser's premium positioning is under pressure as local competitors enhance their high-end offerings, narrowing the price gap [15][19]. - The company faces challenges in maintaining its market share amid changing consumer preferences and economic conditions [10][11].

Financial Data and Key Metrics Changes - In the full year 2024, total Budweiser APAC volumes decreased by 8.8% and revenue decreased by 7%, while revenue per hectoliter grew by 2% [18] - Normalized EBITDA decreased by 6.3%, but the normalized EBITDA margin increased by 21 basis points [18] - Cost of sales increased by 0.7% on a per hectoliter basis, driven by cost management initiatives and commodity tailwinds [19] Business Line Data and Key Metrics Changes - In China, volumes decreased by 11.8% in 2024, with revenue and revenue per hectoliter decreasing by 13% and 14% respectively [19] - In APAC East, volumes increased by 3.6% in the full year, with revenue and revenue per hectoliter increasing by 12% and 8.7% respectively [20] - In South Korea, total market share reached its highest level in over a decade, with significant growth in brands like Kas and Casa [14][19] Market Data and Key Metrics Changes - The business in China faced challenges due to weak consumer sentiment and a decline in on-premise channels [10] - In India, the net revenue of the premium and triple premium portfolio grew by almost 20% in both the fourth quarter and the full year [15] - The in-home channel's volume and revenue contribution increased, reflecting ongoing efforts to premiumize this channel [12] Company Strategy and Development Direction - The company is focused on market share growth in China, with a clear strategy to prioritize Budweiser and adapt to current consumption trends [11][32] - The geographic expansion strategy for the Budweiser brand remains on track, with distribution expanding from 220 cities to 235 cities in 2024 [11] - The company aims to leverage technology to enhance commercial capabilities and drive value creation [13] Management's Comments on Operating Environment and Future Outlook - Management noted a soft consumer environment in China, impacting overall beer market performance [26] - There is confidence in capturing a disproportionate share of category and profit growth in China, despite current challenges [36] - The company plans to continue focusing on premiumization and expanding its distribution network in the in-home channel [99] Other Important Information - The company announced a dividend of $750 million for the full year 2024, representing a 7% increase versus the prior year [21] - The number of carbon-neutral breweries in China doubled to six, with significant reductions in carbon emissions and water usage [16] Q&A Session Summary Question: Recent sales performance in China and inventory management - Management acknowledged a soft consumer environment impacting sales, with proactive inventory management contributing to volume decline [26][29] Question: Strategic focus in China post-management change - The top priority for 2025 is market share growth, with a focus on Budweiser and adapting to current consumption trends [32] Question: Balancing market share recovery with margin and premiumization - The company aims to prioritize market share growth while maintaining long-term margin goals through operational efficiencies and brand mix [45][46] Question: Premiumization strategy and consumer trends - The company has a strong activation plan for Budweiser and is focusing on health and wellness trends with innovations like Zero Sugar [51][52] Question: In-home penetration strategy and challenges - The in-home channel is crucial for growth, with strategies focused on distribution and leveraging partnerships to enhance market presence [99][100] Question: Long-term growth pillars and geographic expansion - Geographic expansion remains a key strategic pillar, with tailored strategies based on market maturity and consumer demand [104]

Sales Performance - Total sales volume for the fiscal year 2024 decreased by 8.8% to 84.811 million hectoliters, primarily impacted by weak performance in the Chinese market, partially offset by strong growth in Korea and India [5]. - In the fourth quarter of 2024, total sales volume and revenue decreased by 12.7% and 11.0%, respectively, significantly affected by performance in China, but partially offset by strong performance in Korea [15]. - For the fiscal year 2024, Budweiser Brewing Company APAC Limited reported a volume decline of 11.8%, attributed to weakened consumer spending and a focus on immediate consumption channels [23]. - Total sales volume for Q4 2024 was 13,613 thousand liters, a decrease of 12.7% compared to Q4 2023's 15,667 thousand liters [94]. - In Q4 2024, Budweiser Brewing Company APAC Limited reported a volume decline of 12.7% on an organic basis and 13.1% on a reported basis [99]. - For the fiscal year 2024, the company experienced an organic volume decline of 8.8% and a reported decline of 8.6% [99]. Revenue and Profitability - Revenue for the fiscal year 2024 declined by 7.0% to $6.246 billion, with a 2.0% increase in revenue per hectoliter, driven by revenue management initiatives in Eastern Asia and favorable product mix in various Asian countries [9][14]. - In the fourth quarter of fiscal year 2024, the company experienced a 17.0% decline in volume in the Western Asia Pacific region, with normalized EBITDA decreasing by 20.4% [20]. - The company maintained a net cash position of $2.9 billion at the end of fiscal year 2024, a decrease of $274 million from the end of fiscal year 2023 [18]. - The comprehensive income for 2024 was $56 million, significantly lower than $594 million in 2023 [42]. - The company reported a net profit of $750 million for 2024, a decrease of 14.77% compared to $880 million in 2023 [47]. - The company's operating cash flow for 2024 was $1,134 million, down 37.24% from $1,811 million in 2023 [49]. - Revenue for Q4 2024 was $1,142 million, down 11.0% from $1,293 million in Q4 2023 [94]. - Gross profit for Q4 2024 was $521 million, reflecting a decline of 14.0% from $617 million in Q4 2023 [94]. - The normalized profit attributable to equity holders decreased from $917 million in fiscal year 2023 to $778 million in fiscal year 2024 [11][14]. - The normalized effective tax rate increased from 33.5% in fiscal year 2023 to 35.3% in fiscal year 2024, primarily due to changes in the country mix [7]. Dividends and Shareholder Returns - The board proposed a final dividend of 5.66 cents per share for 2024, an increase from 5.29 cents in 2023, reflecting a 7% increase in total dividends [3][5]. - The board proposed a dividend of $750 million for fiscal year 2024, representing an increase of 7% compared to the previous year [18]. - The company plans to maintain or increase dividend amounts annually to maximize total shareholder returns [36]. - The company paid dividends of $698 million to Budweiser APAC shareholders in 2024, an increase of 39.6% from $500 million in 2023 [49]. Market Strategy and Growth Initiatives - The company plans to focus on product portfolio and channel selection to drive growth in 2025, alongside digitalizing marketing channels to create value [5]. - The company aims to leverage its strong market presence in Korea and India to counterbalance challenges faced in the Chinese market [13]. - The company aims to leverage its strong brand portfolio and marketing channels to regain market share growth in China, targeting the increasing middle-income households [33]. - The company views India as the next growth driver, focusing on premium and super-premium product categories [33]. - The company is committed to exploring suitable acquisition opportunities to accelerate growth in Southeast Asia and other markets [35]. Sustainability and Corporate Governance - The company aims for sustainability goals, including a 65% reduction in carbon emissions intensity per hectoliter compared to 2017 levels [19]. - The company emphasized its commitment to high standards of corporate governance, adhering to the corporate governance code, with one exception regarding the separation of roles between the chairman and CEO [79]. Financial Position and Assets - Total assets decreased to $14,778 million in 2024 from $16,234 million in 2023, a decline of approximately 8.9% [44]. - Total non-current liabilities decreased to $605 million in 2024 from $735 million in 2023, reflecting a reduction of 17.67% [45]. - Current liabilities also decreased to $3,933 million in 2024, down 15.43% from $4,649 million in 2023 [45]. - The total equity and liabilities of the company stood at $14,778 million in 2024, down from $16,234 million in 2023, reflecting a decrease of 8.93% [45]. Operational Metrics - Normalized EBITDA for the fiscal year 2024 decreased by 6.3% to $1.807 billion, with a normalized EBITDA margin increasing by 21 basis points to 28.9% [10][14]. - The normalized EBITDA margin for the total group was 28.9% in 2024, down from 29.5% in 2023 [59]. - The normalized diluted earnings per share (EPS) for 2024 was 5.85 cents, compared to 6.91 cents in 2023, reflecting a decline of about 15.3% [72]. - The effective tax rate increased from 34.4% in 2023 to 36.3% in 2024 [68]. - The company recognized other operating income of $115 million in 2024, compared to $107 million in 2023, reflecting an increase of approximately 7.5% [62].

Investment Rating - The report maintains a "Buy" rating for Budweiser APAC (1876 HK) with a target price of HK$11.60, reflecting a potential upside of 61% from the current price of HK$7.19 [2][4][9]. Core Insights - The report highlights ongoing challenges in the Chinese market due to macroeconomic factors, high inventory levels, and a shift in channel dynamics, which negatively impacted sales and pricing [8][9]. - Despite strong sales momentum in the South Korean market, price increases are expected to contribute less to revenue growth moving forward [8]. - The report projects a significant decline in normalized EBITDA for Q4 2024, estimating a year-on-year decrease of 25.8% due to reduced sales and rising costs [9][13]. Summary by Sections Financial Performance - Revenue for 2024 is estimated at US$6,280 million, down from US$6,305 million previously, reflecting a 0.4% decrease [14]. - Adjusted net profit for 2024 is projected at US$784 million, a reduction of 6.5% from the previous estimate of US$839 million [14]. - The report anticipates a normalized EBITDA margin decline due to increased costs and lower sales volumes, particularly in the Chinese market [9][13]. Market Analysis - The Chinese market continues to face challenges from a high base effect and weak consumer demand, leading to a projected decline in sales volume [8][9]. - The South Korean market has shown resilience with strong sales, but the impact of price increases is expected to diminish [8]. - The report emphasizes the need for Budweiser APAC to navigate these market dynamics effectively to maintain profitability [9]. Valuation - The target price of HK$11.60 is based on a P/E ratio of 22.4 times the estimated earnings for 2025, which is below the historical average [15]. - The current valuation is considered attractive, with a projected dividend yield of 5.4% for 2025 [15]. - The report suggests that Budweiser APAC's valuation remains compelling compared to its peers in the industry [22].

Investment Rating - The report maintains a **Buy** rating for Budweiser APAC (1876 HK) with a target price of HKD 9.39, representing a potential upside of 27.3% [1][4] Core Views - Short-term performance is pressured by challenges in the China market, but the company's long-term competitive strength remains intact [1] - The company's premium/super-premium product portfolio in China is expected to rebound as consumer spending recovers [1] - In Korea, the company has enhanced its competitiveness through increased investment and new product launches, with an 8.1% price increase on premium/super-premium products expected to boost profitability in 2025 [1] Regional Performance Asia Pacific West (China, India, Vietnam) - China market: Q3 2024 volume declined by 14.2%, average selling price (ASP) fell by 2.1%, leading to a 16.1% revenue drop [2] - India market: Continued strong growth with double-digit increases in premium/super-premium products, which account for 2/3 of India's revenue [2] - Overall APAC West: Volume and ASP declined by 13.5% and 1.9% respectively in Q3 2024 [2] Asia Pacific East (Korea, Japan, New Zealand) - Korea market: Revenue grew by mid-teens in Q3 2024, driven by mid-single-digit volume growth and product mix optimization [2] - Overall APAC East: Volume and ASP increased by 3.9% and 11.4% respectively in Q3 2024 [2] Financial Performance - Q3 2024 revenue: USD 1.705 billion, down 9.4% YoY [3] - Q3 2024 normalized EBITDA: USD 479 million, down 16.6% YoY [3] - Q3 2024 net profit: Down 25.0% YoY [3] - 9M 2024 revenue: USD 5.104 billion, down 6.1% YoY [3] - 9M 2024 normalized EBITDA: USD 1.579 billion, down 6.2% YoY [3] - 9M 2024 net profit: USD 777 million, down 11.6% YoY [3] Financial Forecasts - 2024E revenue: USD 6.531 billion, down 4.7% YoY [7] - 2025E revenue: USD 6.740 billion, up 3.2% YoY [7] - 2026E revenue: USD 7.000 billion, up 3.9% YoY [7] - 2024E net profit: USD 751 million, down 11.7% YoY [7] - 2025E net profit: USD 830 million, up 10.5% YoY [7] - 2026E net profit: USD 924 million, up 11.3% YoY [7] Valuation Metrics - 2025E P/E: 19x (down from 22x average for 2024-25) [1] - 2024E P/E: 16.6x [7] - 2025E P/E: 15.0x [7] - 2026E P/E: 13.5x [7] Market Position - The company continues to gain market share in Korea through expansion in both on-premise and off-premise channels [2] - New product launches (e.g., Cass, HANMAC) in Korea have received positive market feedback [2]

Industry and Company * **Company**: Budweiser Brewing Company, AIPAC Ltd. * **Industry**: Beer and beverage industry, specifically focusing on premium and super-premium segments. Core Views and Arguments * **Performance Impact**: The first nine months of 2024 were impacted by industry weakness in China, partially offset by strong performance in South Korea and India. * **Market Share Gains**: Continued commercial momentum in South Korea and India drove sustained market share gains and revenue per hectolitre growth. * **Premiumization**: The company is leading the premiumization of the beer category, with premium and super-premium portfolio contributing approximately two-thirds of revenue. * **Innovation**: Volume and revenue contribution from innovations within the Budweiser family, including Supreme and Magnum, continue to increase. * **Channel Expansion**: Revenue contribution from the in-home channel grew as a result of ongoing efforts to premiumize the channel. * **Geographic Expansion**: The company's geographic expansion strategy for the Budweiser brands is on track. * **Sustainability**: The company has made progress in sustainability initiatives, maintaining a low-risk rating from Sustainalytics. Key Financials * **Total Volumes**: Decreased by 8.1% * **Revenue**: Decreased by 6.1% * **Revenue per Hectolitre**: Grew by 2.2% * **Normalized EBITDA**: Decreased by 6.2% * **Normalized EBITDA Margin**: Decreased by four basis points * **Gross Profit Margin**: Expanded by 108 basis points * **Cost of Sales**: Decreased by 8.1% China Market * **Performance**: Impacted by a soft industry, particularly from continued weakness in on-premise channels. * **Premiumization**: Leading the premiumization of the beer category, with premium and super-premium portfolio contributing approximately two-thirds of revenue. * **Innovation**: Volume and revenue contribution from innovations within the Budweiser family, including Supreme and Magnum, continue to increase. * **Channel Expansion**: Revenue contribution from the in-home channel grew as a result of ongoing efforts to premiumize the channel. * **Geographic Expansion**: The company's geographic expansion strategy for the Budweiser brands is on track. * **Sustainability**: The company has made progress in sustainability initiatives, maintaining a low-risk rating from Sustainalytics. South Korea Market * **Performance**: Revenues grew by mid-teens in the third quarter, driven by double-digit revenue per hectolitre increase and single-digit volume growth. * **Market Share**: Achieved a strong overall total market share gain, supported by share gains in both the on-premise and in-home channels, led by KAS. * **Innovation**: Further expanded Cast Light Zero Sugar in the third quarter with a campaign featuring South Korean Olympic fencing gold medalist Oh Sang-Wook. * **Geographic Expansion**: The company's geographic expansion strategy for the Budweiser brands is on track. * **Sustainability**: The company has made progress in sustainability initiatives, maintaining a low-risk rating from Sustainalytics. India Market * **Performance**: Business continued to outgrow the industry for the first nine months of the year, driven by double-digit net revenue growth within the premium and super-premium portfolio. * **Premiumization**: Premium and super-premium segments contributed more than two-thirds of revenue. * **Innovation**: The company has made progress in sustainability initiatives, maintaining a low-risk rating from Sustainalytics. Sustainability * **Sustainalytics Rating**: Maintained a low-risk rating from Sustainalytics, ranking 4th among 85 beer, wine and spirits companies and 7th out of 644 food products companies worldwide. * **Global Beer Responsible Day**: Kicked off campaigns across key markets to celebrate a Global Beer Responsible Day to promote smart drinking. * **Commitment**: A commitment the company has been championing for 17 years, in partnership with government and industry stakeholders. Future Outlook * **Premiumization**: The company remains committed to premiumization, with a focus on expanding its premium and super-premium portfolio. * **Geographic Expansion**: The company continues to expand its geographic footprint, targeting lower-tier cities and regions with high growth potential. * **Digitization**: The company is investing in digitization and system integration to improve processes and management visibility. * **Cost Management**: The company remains focused on cost management initiatives to improve efficiency and profitability.