HK Stock Market Move | Beer stocks collectively decline due to weak demand environment dragging down performance, still at low valuation levels after 24 years.

The beer stocks collectively fell. As of the time of publication, CHINA RES BEER (00291) fell by 4.16% to HK$23.05; BUD APAC (01876) fell by 2.77% to HK$7.02; TSINGTAO BREW (00168) fell by 1.02% to HK$53.15. In terms of news, a recent research report by Founder pointed out that the weak demand environment in 2024 has to some extent dragged down performance, and it is expected that the fundamentals will accelerate recovery in 2025. In 2024, the overall beer sector was under pressure in terms of volume due to the external consumption environment, while the upgrade on the price end has slowed down. YANJING Brewery & Guangzhou Zhujiang Brewery performed better than the industry as a whole, driven by the increase in high-end products. With the fundamentals being dragged down, the sector is under pressure, but since the end of September, catalyzed by policies, the sector has shown significant improvement, although it is still at a low valuation in the past five years. Looking into 2025, the bank expects that the ongoing policy implementation will continue to accelerate the recovery of consumption in the catering sector, with the beer sector expected to benefit first. From the perspective of sales volume: In Q1 2025, due to the consumption boost from the Spring Festival in Q1 2024, the base is still relatively high, and with the Spring Festival in 2025 being earlier (January 29, 2025), it is expected that the pre-holiday stocking confirmation for the Spring Festival in 2025 will be included in the revenue for Q4 2024. Moving into Q2 2025, the beer sector will enter a period of low base (especially for Qingdao beer, with sales in Q2 & Q3 2024 being the lowest in the past five years), and the fundamentals have relatively strong recovery elasticity. In terms of average price per ton: The bank believes that with the continuous recovery of on-the-go channels, the high-end process in the beer industry is expected to accelerate, driving continuous improvement in fundamentals. On the cost side, barley costs are still decreasing, but aluminum costs have increased slightly, and it is expected that the cost dividend in 2025 will be less pronounced than in 2024.