On Tuesday, CLSA adjusted its price target for China Resources Beer Holdings Co Ltd (291:HK) (OTC: CRHKY) shares, decreasing it to HK$31.00 from the previous HK$33.00, while keeping an Outperform rating on the stock.
The revision follows the company's first-half results, which showed a 20% growth for its Heineken (AS:HEIN) brand but a slower pace for the mass premium segment. Additionally, the interim dividend payout increased by 6 percentage points year-over-year.
The management of China Resources Beer has revised its 2024 beer volume forecast to a low single-digit year-over-year decline. This adjustment is accompanied by an anticipation of flat year-over-year beer revenue for the full year, owing to a slight increase in average selling prices. This is set against the backdrop of an expected 30% year-over-year growth in baijiu revenue.
The company's outlook for the second half of the year is described as conservative, with a challenging consumption environment noted. Despite this, there is a positive note regarding Heineken's performance, which continues to gain market share from competitors.
China Resources Beer anticipates a new phase of beer premiumization, which will likely involve a shift towards more personalized consumer experiences and a focus on the price-performance ratio, a transition that may require time for the industry to adapt.
In response to the updated volume estimates for the full year, CLSA has reduced its earnings per share predictions for 2024-2026 by 4-5%. This financial recalibration has led to the lowered price target for China Resources Beer's shares.
In other recent news, Jefferies has adjusted the price target for China Resources Beer Holdings Co Ltd., reducing it to HK$37.38 from the previous HK$42.00.
Despite the target cut, the firm maintained its Buy rating, reflecting the company's response to shifts in the China beer market towards premium products.
The company's management has indicated that the market is now in a phase dubbed "premiumization 2.0," characterized by fragmented consumer demand and an emphasis on value.
In response to these market dynamics, China Resources Beer is focusing on volume growth for key offerings like Heineken and Snow Draft, while also investing in its "+N" product line.
The company's strategy includes a long-term vision for growth that involves business diversification and geographic expansion. These are part of a broader plan to capitalize on evolving consumer preferences in the beer market.
The revised price target of HK$37.38 aligns with an earnings revision as indicated by Jefferies. This new target reflects the current market conditions and the company's strategic efforts to adapt and thrive in the changing landscape. These are the recent developments involving China Resources Beer Holdings Co Ltd.
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