China Resources Beer (291.HK) Acquisition of Heineken is expected to be completed in this year, helping to open up mid-to high-end market March 14, 2019 441

PSR Recommendation: NEUTRAL Status: Initiation
Target Price: HKDHKD30.30

Investment Summary

The interim revenue of FY2018 increased by 11.4% y.o.y. mainly due to the price hikes
of some of its products, and the sales volume of mid- to high-end products also increased.
The ASP during the period has increased by 13%, while the sales volume was slightly
affected by the mark-up, decreased by only 1.5% . During the period, GPM increased
significantly by 2.5 ppt to 36%. According to the management team, the overall business
performance including indicators like sales volume and GPM of 2H was worse than that
in 1H, which was due to the weak macro economy and the company`s strategy of not
joining the price war of the industry. The total sales volume of FY2018 was worse than
the market (0.8% decline for industry sales), and the market share has also fallen from
27% in 2017, but still in the leading position. The company`s FY2019 sales target is to
keep constant of that of in FY2018. There will be fewer chance of another round of price
hikes. But as it will continue to develop mid- to high-end business, ASP is expected to
have a low single-digit growth every year In the next three to five years.

About the author

Profile photo of Tracy Ku

Tracy Ku
Investment Analyst

Graduated from Chinese University of Hong Kong, majoring in Economics for Bachelor Degree, and Journalism for Master Degree. Worked in financial news industry for more than four years.
Currently cover retailing, property sectors and IPOs. Good at analysis for the companies with economic policies and industry prospects.

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