The Zhitong Finance App learned that Fangzheng Securities released a research report saying that there is still plenty of high-end space and strong certainty. The current valuation is at a historically low level, which has ushered in value layout opportunities. The bank believes that the current leading valuation has fallen back to a low level of nearly five years and has value layout opportunities. It is recommended to focus on China Resources Beer (00291), which has “an alpha single product, Heinekinek+ strong channel control”; Tsingtao Brewery (600600.SH), which “has strong control over the base market and obvious acceleration of the non-base market”; “Yanjing Beer (000729.SZ), which has an accelerated reform process and continued to realize profits”; “Continuous channel reform, outstanding brand matrix characteristics” (600132.SH); “continuous channel reform, outstanding brand matrix characteristics”; Budweiser Pacific with “brand+channel” advantages highlight (01876)

Fangzheng Securities's views are as follows:

The market is pessimistic about high-end beer expectations, and sector valuations have now fallen to a historically low level.

Since 2018, the beer industry has fully entered a new stage of high-end production. Under the clear path of cost reduction - high-end, cost reduction - closing inefficient factories & layoffs + incentive optimization, the gross profit margin and profitability of wine companies have continued to improve. The beer sector's valuation has continued to decline since April 23. As of April 8, 2024, the beer sector had a cumulative decline of 28.7% compared to the beginning of 2023. The bank believes that the main reason is that under pressure from the external economic environment, market concerns about the escalation of beer consumption have increased (along with factors such as extreme weather and weak demand in '23).

The bank reviewed the beer market in the US and Japan, with the aim of solving two problems: 1) the overall high-end development process of the US and Japan beer industry; 2) the performance of the US and Japanese beer industry under external economic pressure

The bank found: 1) The beer industry in the US and Japan both experienced a period of rapid increase in tonnage prices, which continued for a long time. The rapid increase in tonnage prices in the US and Japan lasted 20 to 10 years, respectively, and the corresponding range CAGR was 5.3%/6.8%, respectively. Subsequent developments are fragmented: the Japanese market: the increase in beer prices then slowed down, and prices fell slightly after 2000 due to deflation, but there were differences in performance between channels, and the price of beer for eating out still rose slightly; the US market is more resilient. After entering the maturity period, it is still undergoing a second round of structural upgrades, and tonnage prices continued to rise (1993-2023 CAGR reached 2.1%);

2) Under external economic pressure, high-end beer in the US and Japan are still showing resilience. The US performed better than Japan (Budweiser increased CAGR by 3.7% in 8-12, a margin higher than CPI). The bank believes that there is a big difference between the two. The leading US high-end strategy has strong strength and rapid growth period. Through “accelerating innovation+holding high standards”, they can further increase concentration. Under pressure from the external economic environment, it can still promote structural upgrading through methods such as “price adjustment+promotion of new high-end products”. Looking at Japan, the high-end beer market is currently still positioned as a niche market. The main participants are “Suntory + Sapporo,” and Ryuichi & Ryuji's “Asahi+Kirin” promotion efforts are insufficient. However, under the promotion of Suntory, the share of high-end beer in the traditional Japanese beer market still increased from 3.5% in 2003 to 15.2% in 2017.

Risk warning: Increased market competition, rising raw material prices, falling short of expectations, etc.