The Zhitong Finance App learned that Guotai Junan released a research report saying that based on the review of the US beer industry, the long-term structural upgrading trend of the Chinese beer industry has not changed, and there are booming segments and targets. There is still room for improvement in leading profit margins. Currently, the 2024 industry average PE of about 18X is at an all-time low, or is expected to recover marginally.

Guotai Junan's views are as follows:

There is still a boom in maturity, and product innovation has been upgraded for a long time. Focusing on reviewing the performance of the US beer industry in the context of industrial maturity, economic downturn, and historical points disrupted by the epidemic, it was found that it had the following characteristics:

1) The tonnage price is highly positively correlated with real GDP per capita and the level of inflation. The tonnage price fluctuates over a long period of time but the trend continues to rise. Since 2000, it has accumulated a cumulative increase of 72%, outperforming the inflation index. At the same time, leading players have pricing power;

2) Even if the industry's sales trend declines, the leaders may still achieve an upward sales boom. At the same time, large single products will still rise during the economic downturn, bucking the trend, and sales will grow at a high rate;

3) Excluding the nominal currency factor, product innovation is a long-term driving factor for structural upgrading, and category expansion brings about an incremental market. The beer industry also has the flexibility and expansion advantages of cross-track competition, as well as the resilience and monopoly advantage of the beer circuit itself. The bank believes this is the core reason why the beer industry leaders can steadily cross the cycle.

New consumer trends nurture large single products, and are a good opportunity for industry consolidation during the downturn. In these three historical periods, the US beer industry has gone through several consumer trends, such as high to low, high heat to health, single to diverse, and male to female consumption. Products that can grasp new populations, new channels, new ideas, and new scenarios have all achieved reverse market growth. For example, Medelo Especial, which focuses on high cost performance compared to Hispanics, doubled sales in 2008-13, and transformed sports drinks to position the health and female group Michelob Ultra with a compound growth rate of 16% in 2012-17. At the same time, after two periods of economic downturn, the leaders in the US beer industry achieved the results of increased concentration and industrial mergers and integration. The overall pattern of monopoly competition was further consolidated, and at the same time, it spawned multi-category development and overseas expansion strategies. The concentration between brands changed with the release of large single products.

Profit margin increases through the cycle, leading valuation centers are in the 15-45X range. After the US beer industry entered a mature period, Budweiser North America's EBITDA profit margin further increased from 23.4% (2001) to 40.1% (2020), and remained high through the cycle. According to the bank's analysis, it has benefited from leading 1) cost control capabilities; 2) the trend of structural upgrading; 3) the characteristics of the monopoly pattern; and 4) the opportunity for mergers and acquisitions. Even though the EBITDA profit growth rate slowed and the increase in profit margins in the later stages entered a bottleneck period, AB InBev's valuation in 2012-2023 (excluding extreme values) still fluctuated in the 15-45X range. The valuation center was around 35X, and at the same time showed a highly volatile trend.

Risk warning: rising costs, changing consumption habits.