20220506-招银国际-百威亚太-01876.HK-Solid_1Q22_on_strong_APAC_East_performance；we_stay_vigilant_on_potential_volume_risk_in_2Q_4页_834kb

Bud APAC (1876 HK) Company Update Summary

Core Content Overview

This document presents an equity research update on Bud APAC (1876 HK), a subsidiary of AB InBev, focusing on its financial performance in 1Q22, regional market insights, and key financial metrics. The report also includes analyst ratings, target prices, and disclosures regarding the research firm's independence and legal liabilities.

1Q22 Performance Highlights

• Normalized EBITDA: Increased by 7.6% YoY to US$570 million, driven by strong performance in APAC East.
• APAC East:
  • Revenue and EBITDA grew by 10% and 45% YoY, respectively.
• APAC West:
  • Revenue declined by 1% YoY, impacted by heightened COVID control measures in China.
• Overall Volume:
  • 4% YoY decline, but 3% YoY increase in ASP (Average Selling Price) offset the volume loss.
• Consensus vs. Actual:
  • Results slightly exceeded consensus, but lockdowns in Shanghai and Beijing are expected to impact 2Q22 volume.
• Target Price:
  • Maintained at HK$28.0, based on 21x EV/EBITDA multiple, reflecting 3-year average.
  • Up/Downside: +33.3% from current price HK$21.0.

Regional Insights

China

• Sales volume declined 4.3% YoY in 1Q22 due to stricter Covid-19 restrictions.
• Premium and super premium brands outperformed, showing HSD/strong DD growth compared to pre-pandemic levels.
• EBITDA remained flat YoY, supported by diversified production capacity and agile resource allocation.
• Management remains optimistic about the long-term potential of the Chinese market.

South Korea

• Strong recovery in 1Q22 as Covid restrictions eased.
• Sales volume, revenue per kl, and total revenue all showed YoY growth.
• Market share gains in both in-home and on-premise channels.
• EBITDA growth was strong in 1Q22.
• Channel mix benefits on margins are expected to fade post-pandemic, which may affect future profitability.

India

• Improved business environment with eased restrictions since March.
• Premium and super premium portfolios recorded strong DD growth YoY.
• Management remains highly optimistic about the premiumization potential in the long term.

Financial Summary

Earnings Summary (FY20A - FY24E)

Key Ratios

• Gross Profit Margin: Increased from 53.9% in FY21A to 54.5% in FY24E.
• Operating Margin: Rose from 21.0% to 24.9%.
• Pre-tax Margin: Improved from 20.8% to 24.8%.
• Net Margin: Increased from 14.0% to 16.6%.
• EV/EBITDA: Maintained at 14.2x in FY22E, declining to 10.8x in FY24E.
• Current Ratio: Improved from 0.5x to 1.2x.
• Inventory Turnover Days: Fluctuated between 55 and 59.
• Net Payable Days: Stabilized around 243.
• Net Receivable Days: Stabilized around 22.

Cash Flow Summary

• Net Cash from Operating Activities increased from US$1,301 mn in FY20E to US$2,310 mn in FY24E.
• Capital Expenditure & Investments decreased from US$516 mn to US$550 mn.
• Equity Raised was US$659 mn in FY20E, with no new equity raised in FY22E onwards.
• Dividend Paid rose from US$315 mn to US$561 mn.
• Net Change in Cash increased from US$297 mn to US$1,199 mn.
• Cash at the End of the Year: Rose from US$877 mn to US$4,684 mn.

Balance Sheet Highlights

• Total Net Assets increased from US$10,743 mn to US$13,685 mn.
• Shareholders' Equity grew from US$10,685 mn to US$13,488 mn.
• Current Assets rose from US$2,332 mn to US$6,104 mn.
• Current Liabilities increased from US$4,637 mn to US$5,038 mn.
• Inventory increased from US$434 mn to US$609 mn.
• Non-current Liabilities remained stable at US$851 mn.
• Minority Interest increased from US$58 mn to US$197 mn.

Analyst Rating & Investment Outlook

• Rating: BUY (Maintained).
• Target Price: HK$28.0.
• Potential Return: +33.3% over next 12 months.
• Analyst: Joseph Wong & Zheng Xiaohui.
• Contact: (852) 3900 0838 | josephwong@cmbi.com.hk | zhengxiaohui@cmbi.com.hk.

Important Disclosures

• Auditor: PricewaterhouseCoopers.
• Research Independence: The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation.
• Conflict of Interest: CMBIGM may have investment banking relationships with the companies mentioned, which could affect the report's objectivity.
• Legal Liabilities: CMBIGM is not liable for any loss or damage arising from reliance on the report.
• Distribution Restrictions:
  • UK: Only for persons under Article 19(5) or Article 49(2)(a)-(d) of the Order.
  • US: Only for major US institutional investors.
  • Singapore: Distributed by CMBISG, an Exempt Financial Adviser.

Conclusion

Bud APAC delivered a solid 1Q22 performance, driven by APAC East and premiumization trends, despite volume challenges in APAC West. The company is expected to maintain its 2022E forecasts and has a BUY rating with a target price of HK$28.0. While China's restrictions pose a risk to 2Q22 volume, the premium brands continue to perform well. The financials show positive trends, with increasing margins, strong cash flow, and growing net assets. The analyst remains optimistic about the long-term growth potential in key markets like South Korea and India.