Goldman Sachs has released a research report maintaining its "Buy" rating on BUD APAC (01876) while lowering its 12-month target price from HK$6.90 to HK$6.55.
The investment bank noted that the company's third-quarter sales performance was better than the market had previously feared, but EBITDA performance was weaker, mainly due to sluggish sales volumes in China and pressure on profit margins.
After attending the company's earnings conference call, the bank said management reiterated that at this stage, stabilizing sales volume and market share in China is the priority, with profitability improvement to be considered afterward. Management also acknowledged that given the weak industry conditions and soft demand sentiment, the market recovery will take longer than previously expected.
The bank pointed out that China's beer industry saw sales volumes decline by a high single-digit percentage year-on-year in the third quarter, with demand remaining weak in October. Although progress has been made in channel destocking, management expects further adjustments will still be needed in the near term.
On the cost side, management stated that from the fourth quarter through 2027, the Chinese and Korean markets may face raw material cost headwinds, particularly from rising aluminum prices, and the company currently has no plans to raise prices in either the Chinese or Korean markets.
In the Korean market, despite weak industry growth momentum, the company continues to increase its market share. In the Indian market, benefiting from premiumization and market share gains, the company continues to maintain double-digit sales volume growth.
Comments