The Zhitong Finance App learned that Guotai Junan released a research report saying that based on a review of the Japanese beer industry, the bank believes that Chinese beer leaders will go through the cycle to achieve long-term structural upgrades and higher tonnage prices, and that the industry has opportunities to explode in large individual products and segments. The favorable competitive pattern is compounded by a downward trend in costs, and there is still room for improvement in leading profit margins. Currently, the average industry valuation of 20X is at an all-time low, and it may be repaired marginally.

Guotai Junan's views are as follows:

The upward trend in tonnage prices did not change, and large single products broke through during the downturn.

Reviewing the performance of the Japanese beer industry during four periods of economic downturn (including epidemic disturbances) after the collapse of the economic bubble and the adjustment of the alcohol tax policy, the bank found the following characteristics: 1) Economic stagnation and deflation showed a short-term impact on the industry's tonnage price. The long-term tonnage price of the industry still fluctuated and rose, which was positively correlated with real GDP per capita, and the cumulative increase clearly outperformed CPI. 2) Against the backdrop of a deteriorating population structure and declining industry sales, there are still large single products that have bucked the trend. For example, Super Dry helped Asahi achieve 30.4% CAGR (1994-1999) and TPM's 2005-06 TPM sales double—quadruple growth, becoming the number one high-end beer brand in Japan, and Kinmugi's high growth momentum has become Japan's third-class beer sales champion in recent years. 3) Continuous product innovation and category innovation by leading companies is the main driver for long-term structural upgrading and crossing the cycle.

Times of crisis nurture new business opportunities, and the oligarchy pattern divides the racetrack.

During the downturn in history, the Japanese beer market experienced the following new consumption phenomena: 1) the rise of female consumers and healthy drinking awareness; 2) along with alcohol tax adjustments, demand for refreshing beer, third-class beer, and low-alcohol and non-alcoholic beer increased, and large single products continued to emerge; 3) The home drinking scene promoted the development of non-ready-to-drink channels, and the beer canning rate increased. The monopoly situation in the Japanese beer industry is stable, and the overall market share of the top four has remained around 90% since 2003. Asahi, Sapporo, Suntory, and Kirin each have their own strengths in segmented racing tracks, gaining market share and unique market positions through the creation of large single products in cost-effective sparkling wines, third-class beers, and high-end low-alcohol and craft beer tracks, respectively.

Profit margins continued to improve, and leading valuations increased in stages.

Take the leading company Asahi as an example. After the industry matured, the profit margin increased from 5.4% (2006) to 14.3% (2022) and remained high. According to the bank's analysis, the main reasons are 1) significant results in cost reduction and efficiency; 2) active development of overseas markets; 3) product innovation and major product upgrades; and 4) diversified business support. Since 2007, the overall stock price of the Asahi Group has fluctuated within the 15-30X valuation range. The average valuation is 20X, and there have been three major phased valuations during the maturing period of the industry.

Risk warning: rising costs, changing consumption habits.