Macquarie: Expect most Chinese beer companies to report a decline in sales volume in the fourth quarter of 2024, Adjust target prices for CHINA RES BEER (00291) and BUD APAC (01876) downward.

McKinsey released a research report stating that in the face of industry challenges, dividend distribution has become a glimmer of hope. It is expected that the cash yield of CHINA RES BEER (00291), TSINGTAO BREW (00168), Chongqing Brewery (600132.SH), and BUD APAC (01876) for the fiscal year 2024 will reach 4% to 6%. The firm has lowered the target price for Ruinbeer from HK$35 to HK$30.2; raised the target price for Tsingtao Brew from HK$60 to HK$78.4; and lowered the target price for BUD APAC from HK$14.76 to HK$13.4. All three stocks are given an "outperform the market" rating. The report states that in October and November of last year, beer sales in China decreased by 2.3% and increased by 5.7% respectively. Performance of mid-range products was better than high-end products. The firm points out that due to the industry reducing channel inventories, sales in December of last year may also be weaker. Therefore, it is expected that most Chinese beer companies will see a decline in sales in the fourth quarter of last year. McKinsey believes that BUD APAC had the worst sales performance, with a 21% decline in sales. As for average selling prices, Tsingtao Brew and CHINA RES BEER may achieve low single-digit growth, while Budweiser and Chongqing Brewery may face greater pressure. The firm expects that most beer companies will invest in channel management to alleviate profit declines. They believe that Tsingtao Brew's net loss in the fourth quarter of last year will narrow to RMB 602 million, while Chongqing Brewery's losses will expand further. Due to reduced central subsidies and a high base for disposal income in the second half of 2023, it is estimated that Ruinbeer's beer business division's operating profit in the second half of last year dropped by 74.6% year-on-year. BUD APAC's EBITDA profit in the fourth quarter of last year is expected to decrease by 18.3% year-on-year, with EBITDA in the Asia Pacific region growing by 7.6%, but partially offset by a 37.8% decrease in EBITDA in China.