Haitong International released a research report indicating that BUD APAC (01876) is undergoing a significant adjustment phase in the Chinese market. While short-term performance is under pressure from restructuring challenges and external headwinds, positive signals are emerging from its channel transformation, with market share showing preliminary improvement in Q4. The firm forecasts EPS for 2026-2028 at $0.04/$0.05/$0.05 respectively (previous estimates for 2026/2027 were $0.05/$0.06). Considering recent market optimism about consumption recovery and the company's valuation premium as a leading premium beer producer in the Asia-Pacific region, Haitong raised the 2026 valuation multiple from 20x PE to 25x PE, maintaining a target price of HK$7.9 and a "Neutral" rating.
Key points from Haitong International are as follows:
**Q4 and Full-Year 2025 Performance:** Revenue and profit faced pressure, with performance in China significantly weaker than the industry. Full-year revenue/EBITDA reached $5.76 billion/$1.59 billion, down 6.1%/9.8% year-on-year. Q4 revenue/EBITDA were $1.07 billion/$170 million, declining 4.2%/24.7% year-on-year. China was the primary drag, with Q4 revenue/EBITDA down 11.4%/42.3% year-on-year; volume/ASP fell 3.9%/7.7% respectively. For the full year, China revenue/EBITDA decreased 11.3%/15.7%. In South Korea, Q4 revenue was flat, with low single-digit ASP growth driving margin expansion, though volume saw a low single-digit decline, outperforming the industry. Affected by non-recurring items including South Korean tax issues and one-time costs in New Zealand, full-year net profit attributable to shareholders was $489 million, down 32.1% year-on-year. Cash flow remained robust, with the dividend payout ratio increasing to 153%.
**China Market:** Industry volume stabilized while prices declined. The company is actively transforming, with an inflection point for improvement expected in 2026. Industry volume was stable in Q4 2025, with leading breweries operating steadily. However, industry ASP growth has been under persistent pressure over the past two years, with marginal deceleration hindering premiumization. As a premium beer leader, BUD APAC increased investments in 2025 to develop emerging channels like instant retail and O2O, coupled with a temporary weakening of operating leverage, leading to short-term performance pressure. Nevertheless, core indicators show positive signals—the decline in China volume narrowed from 11% in Q3 2025 to 3.9% in Q4 2025, with both channel inventory value and turnover days decreasing year-on-year, indicating initial success in channel adjustments. Multiple factors support ASP improvement in 2026: policies against internal competition and monopolies are expected to effectively boost consumer confidence and spending power, alongside major sporting events catalyzing scenario-based consumption demand. The company's premiumization strategy and channel transformation benefits are poised to materialize, providing a solid foundation for earnings recovery.
**2026 Management Outlook:** Management outlined three core focuses for 2026: organic growth, inorganic expansion, and shareholder returns. With a low base, earnings recovery appears highly certain. For organic growth, the China region will focus on premiumization in the home consumption channel and O2O expansion, leveraging the Core++ category and BEES platform. In South Korea, the company maintains its industry leadership, with better price acceptance than peers. In India, a deepening premiumization strategy drives high growth, with these three core regions providing synergistic support. For inorganic expansion, the company will explore M&A and partnership opportunities in the Asia-Pacific region, supported by strong cash flow. Regarding shareholder returns, the high dividend policy remains consistent, with a 5.6% dividend yield providing a solid safety cushion for the share price. Continued depreciation of the US dollar will also contribute positively to financial statements. According to sensitivity analysis, for every 0.2 depreciation in the USD/CNY exchange rate, the company's revenue would increase by 2% and net profit by 5%. With 2025 net profit attributable to shareholders hitting an eight-year low, the low base combined with the clearance of external adverse factors supports a high likelihood of earnings recovery in 2026.
**Risk Factors:** Upside risks include 1) Faster-than-expected consumption recovery in China; 2) Accelerated results from home channel transformation; 3) Continued USD depreciation boosting financial statements; 4) Materialization of M&A or strategic partnerships. Downside risks include 1) Slower-than-expected progress in China's premiumization strategy; 2) Worsening competition or renewed tax risks in South Korea; 3) Rebound in raw material costs; 4) Poor execution of reforms.
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