20160204-法国巴黎银行-华润啤酒-00291.HK-Only_half_the_story_is_priced_in_11页_313kb

China Resources Beer (291 HK) Summary

Core Content

China Resources Beer (CRB), a subsidiary of China Resources (Holdings) Ltd, operates exclusively in the beer business in China after divesting its retail, soft beverage, and food distribution segments. The company has faced a share price pullback from HKD16.60 to HKD12.14, attributed partly to weak 2H15 operating data. However, the decline in revenue and ASP is primarily due to accounting adjustments following the restructuring, and on a like-for-like basis, both metrics have actually increased.

The report recommends an upgrade to BUY with a new target price (TP) of HKD15.50, based on a 11.5x FY16E EV/EBITDA multiple, which aligns with global peer averages. This TP reflects the improved value following the share price decline and the potential for EPS growth if CRB acquires the remaining 49% stake in Snow, a leading beer brand globally.

Key Points

• Share Price Performance:

  • Current price: HKD12.14
  • Target price: HKD15.50 (+27.7% upside)
  • Previous TP: HKD23.51 (-34.07% change)

• Accounting Adjustments:

  • CRB changed accounting practices due to the shift from a multi-division company to a single beer company.
  • Marketing expenses were reclassified, reducing reported revenue and ASP.
  • On an apples-to-apples basis, revenues and ASP increased by 3% and 5% respectively.

• EPS Upside Potential:

  • If CRB acquires the remaining 49% stake in Snow, 2016E EPS could increase by 30–40%.
  • The acquisition is expected to be financed with HKD5b cash and HKD16.5b–26.5b debt at a 10% interest rate.
  • The potential EPS growth is sensitive to the acquisition price and interest rate, with a 10% discount leading to a 30–40% increase.

• Market and Valuation Context:

  • The report argues that the market over-reacted to the weak operating data.
  • CRB's fundamentals remain stable, and the price drop represents a good entry point.
  • The new TP is derived from a pure EV/EBITDA approach, excluding the special dividend, which was previously considered in the valuation.

Key Financial Data

Investment Thesis

• CRB is now better valued after the share price pullback.
• The company's fundamentals are strong, and the price decline is due to profit-taking in a weak market.
• The potential acquisition of Snow could significantly boost EPS, with a 30–40% increase possible.
• The report believes the market has over-reacted to the weak 2H15 data and that the TP is justified by the company's strong underlying performance.

Catalysts

• Any news regarding the potential acquisition of the 49% stake in Snow from SABMiller could positively impact CRB's share price.

Risks

• Worse-than-expected decline in Chinese beer market volume.
• Increased competition from other players in the beer sector.

Key Executives

Peer Comparison (Global)

Scenario Analysis (EPS Change if CRB Acquires Snow)

Summary of Key Assumptions

Conclusion

CRB is currently undervalued, with a strong potential for EPS growth if it completes the acquisition of the remaining 49% stake in Snow. The report suggests that the share price weakness is due to profit-taking in a weak market and not fundamental issues. The TP of HKD15.50 is based on a more accurate EV/EBITDA multiple and reflects the company's resilient performance and potential for growth.