+ 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.
– 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-à-vis white spirits). A year ago volumes benefitted from front-loading of volumes ahead of price increases.
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.
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.