Zhitong Finance App learned that Zhongtai Securities released a research report saying that the 2023H1 beer sector achieved healthy growth in revenue and profit, showing strong resilience against the backdrop of a weak consumption environment. Looking ahead, the bank believes that the beer sector still has strong certainty and greater profit elasticity. The average price will continue to benefit from the restoration of high-end drinking channels, and the acceleration trend is expected to continue; it is expected that the cost side will turn negative year-on-year in the second half of the year, while barley is likely to enter a downward channel in 2024. Although Q3 is under pressure from short-term sales volume decline, short-term sales volume fluctuations are recommended to be viewed rationally, focusing on the core logic of accelerating the month-on-month increase in profitability.
Key recommendations:Yanjing Brewery (000729.SZ), Tsingtao Brewery (600600.SH), China Resources Beer (00291), Chongqing Brewery (600132.SH).
The main views of Zhongtai Securities are as follows:
2023Q2 Overview: Revenue is growing steadily and profits remain high.
2023H1 beer companies' revenue generally grew by double digits, mainly benefiting from a recovery in sales volume brought about by demand recovery and continued price increases; profit growth rates all exceeded revenue growth, mainly due to average price growth driven by high-end, faster than the rise on the cost side, driving an increase in gross margin, and accurate cost reduction. In 2023Q2, most beer companies' revenue grew by high single digits, and the profit growth rate continued to be higher than the revenue growth rate. Looking ahead to the second half of the year, the bank believes that with the restoration of high-end drinks, the increase in average prices is expected to accelerate month-on-month; at the same time, cost pressure is further narrowing, and unit costs may fall year on year, thus accelerating the increase in profitability.
Sales volume: Industry output increased 7% in the first half of the year, and growth or slowed down under a high Q3 base.
Production in the 2023H1 beer industry increased 7.0% year on year, up 4.7% compared to 2019H1. This is mainly due to retaliatory consumption after the liberalization of the epidemic at the beginning of the year compounded by the low base of the epidemic in March-April 2022. 2023Q2 sales volume still achieved significant positive growth, mainly due to the low base of 2022Q2 combined with stocking during this year's peak season. Looking ahead to 2023Q3, the hot weather base for the same period last year+the impact of rainfall in the northern+removal of inventory, sales volume may be under pressure; while 2023Q4 is expected to achieve a strong recovery under the low sales volume base caused by the peak of epidemic infections last year.
Price: High-end scenarios continue to be repaired, and average price increases have accelerated month-on-month.
The 2023Q2 high-end drinking scenario was gradually repaired. The average price growth rate of beer companies accelerated markedly compared to Q1, and the product structure was clearly optimized month-on-month. The average price of Tsingtao Brewery Q1 increased by 4.7%, Q2 increased by 5.2%; the average price of Yanjing Beer Q1 increased by 0.8% and Q2 increased by 5.3%; the average price of Chongqing Beer Q1 increased by 0.5% and Q2 increased by 4.0%; Budweiser China's average price in Q1 increased by 3.2%, and Q2 increased by 7.7%. Tsingtao Brewery's overall, main brand, and high-end Q1 sales volume increased by 11.0%, 7.5%, and 11.6% respectively, and the structure increased slowly; Q2 increased 2.8%, 9.0%, and 18.6% respectively, with obvious high-end growth. The premium, mainstream, and economical revenue of Chongqing Beer increased by -3.4%, 8.1%, and 11.4% respectively in Q1, and the structure was weak; Q2 increased by 6.4%, 15.7%, and -0.3%, respectively, and the structure was optimized. In the second half of the year, the bank believes that in the context of a low structural base, high-end drinks will be further restored, and the average price is expected to continue to accelerate month-on-month.
Cost: The pressure on the cost of tonnes of alcohol is slowing down, and packaging materials and barley have successively released cost dividends.
The pressure on beer costs in 2023Q1 is still quite obvious. Since Q2, as the cost of packaging materials has fallen back to the reporting end, the pressure on the cost of tonnes of alcohol has clearly slowed down. Currently, the price of packaging materials such as cans and cartons is low. The price of aluminum has dropped about 10% year on year, and the price of corrugated paper has dropped 20% + year on year. The cost side is still expected to benefit from falling packaging prices in the second half of the year, and the cost of tonnes of alcohol can be expected to drop year on year. The price of imported barley fell month-on-month, and the year-on-year increase narrowed markedly. At the same time, Australian wheat was cancelled. The cost side is expected to benefit from a fall in barley prices in 2024.
Profitability: Gross margin is increasing at an accelerated pace, and the cost ratio is well controlled.
Benefiting from the increase in tonnes of alcohol revenue, cost pressure has slowed down compared to 2022. Beer companies' gross margin generally increased in the first half of the year. At the same time, cost ratio control was good, and gross sales gaps increased. 2023Q2 benefited from a month-on-month increase in revenue growth for tonnes of alcohol, a decrease in pressure on the cost of tonnes of alcohol month-on-month, a month-on-month acceleration in gross margin increase, and a month-on-month acceleration in gross sales margin growth over Q1 when the cost ratio was well controlled.
Risk warning:The risk that high-end ready-to-drink recovery falls short of expectations; the risk that prices of major raw materials will fluctuate; worsening market competition brings about promotional activities that exceed expectations; the public information used in the research report may be delayed or not updated in a timely manner; the risk of deviations in industry data measurement; and the risk of third-party data citation.