The Positive
+ Rebound in beer revenue. Beer continued to enjoy revenue growth of 13.7% YoY driven primarily by higher prices. The uptick in volumes was a more modest 4.5% YoY to 684mn litres. Sales growth in Vietnam is expected to weaken near-term due to the weakening economy, especially in manufacturing. Sabeco could pick up some volumes if consumers trade down from mass premium to mainstream brands. Â
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The Negative
– Weak spirit volumes. Revenue declined 6.4% YoY, dragged down by a contraction of volumes by 15.4% YoY. Offsetting the weak volumes were higher prices and a better sales mix of brown spirits (vis-Ã -vis white spirits). A year ago volumes benefitted from front-loading of volumes ahead of price increases.
Outlook
1Q23 faced tough comparables due to the heavy front-loading of volumes a year ago. Even excluding the base effect, volumes declined 8% against 1Q21. We worry higher prices may have negatively impacted volumes. Margins are also weaker from higher marketing spend to boost brand-building after cut-backs during the pandemic.
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Downgrade from BUY to ACCUMULATE with unchanged TP of S$0.80
Our target price stays at S$0.80, based on 18xFY23e earnings, its 5-year average, plus associate market cap.
Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.
He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.