Guotai Junan: Beer industry expects stable sales volume and price increase, cost reduction will improve profit margins.

Guotai Junan released a research report stating that it is expected that the beer industry sales volume in 2025 will be neutral, and the industry structure upgrade is expected to continue. Raw material costs are still in a downward cycle, and cost efficiency may narrow compared to 2024. Competition is steady with moderate cost input. Profit levels are expected to further improve, and capital expenditures of beer companies in 2025-26 may show a downward trend, with the medium-term dividend payout ratio expected to increase, enhancing overall shareholder returns. Key points by Guotai Junan are as follows: Neutral sales volume expected, upgrade in structure may continue According to research, it is expected that the industry sales volume in 2025 may slightly decrease to flat (industry total volume is expected to decline by a low single digit in 2024). The bank predicts that in 2025, Tsingtao Brewery's sales target is relatively more aggressive, Yanjing Brewery's sales target is better than the industry average, AB InBev may include sales market share target as an important evaluation factor and face challenges, Chongqing Brewery may maintain the industry average, while China Resources Beer's target is relatively conservative. In terms of price per ton, with the industry-wide upgrade in structure and the trend of reduced lower-end volume remaining unchanged in 2025, assuming the economic situation remains the same, the industry price per ton is expected to slightly increase, though the increase may be narrower compared to 2024, with AB InBev and Chongqing Brewery/Carlsberg facing relatively higher pressure in price per ton increase. Costs are still in a downward cycle, cost input is relatively stable According to calculations, it is expected that raw material costs will still be in a downward cycle in 2025, with cost efficiency possibly narrowing compared to 2024. The bank predicts a year-on-year decrease in barley prices, stable to slightly lower glass bottle prices, stable cardboard prices, and a slight increase in aluminum can prices but with limited impact. In terms of competition, it is expected that there will not be a vicious price war, and the trend of increasing industry profit levels remains unchanged. In terms of cost input, China Resources Beer may be the most cautious, AB InBev remains stable, Tsingtao Brewery, Yanjing Brewery, and others may focus on precise marketing in local markets, improving cost-effectiveness, with Yanjing Brewery still benefiting from supply-side improvements, and Tsingtao Brewery still having room for profit margin improvement in the medium term. The trend of increasing dividend payout ratio starts, enhancing shareholder returns According to discussions, it is expected that the overall dividend payout ratio of the industry will increase year-on-year in 2025, with Tsingtao Brewery and China Resources Beer expected to continue increasing in 2025-26, Carlsberg and AB InBev expected to maintain their 2024 dividend levels in 2025, and Yanjing Brewery having room for improvement in medium-term dividend payout ratio. The bank predicts that the capital expenditures of beer companies in 2025-26 may show a downward trend, enhancing overall shareholder returns. Investment recommendation: Based on recent market research and calculations, it is expected that the beer industry sales volume in 2025 will be neutral, the industry structure upgrade will continue, costs will continue to decrease, cost input remains stable, and the medium-term dividend payout ratio is expected to increase. Recommendations for hold: Tsingtao Brewery (600600.SH), Beijing Yanjing Brewery (000729.SZ), Guangzhou Zhujiang Brewery (002461.SZ), Chongqing Brewery (600132.SH), Hong Kong stocks: TSINGTAO BREW (00168), CHINA RES BEER (00291) Risk warning: Cost fluctuations, extreme weather effects, changes in consumer habits