CICC: Maintains "outperform" rating on BUD APAC (01876) with a target price of HK$9.80.

CICC released a research report, stating that considering the weak demand in the BUD APAC (01876) Chinese region but the favorable trend in the Korean and Indian markets, the EBITDA for 2025 is projected to be $1.9 billion, and for the first time, the EBITDA for 2026 is introduced at $2.0 billion. The current stock price corresponds to 6.1/5.6 times EV/EBITDA for 2025/26, maintaining the target price of HK$9.80 per share, corresponding to 7.1/6.6 times EV/EBITDA for 2025/26, which represents a 13.2% upside from the current stock price, maintaining an outperform rating in the industry. Key points from CICC: - 4Q24 performance slightly lower than the bank's expectations The company announced its 2024 performance: single 4Q24 revenue/sales volume/ASP/EBITDA decreased by -11.0/-12.7/+1.9/-7.2% YoY, while the gross profit margin/EBITDA margin decreased by -1.61/+0.84ppt YoY, with Chinese revenue/sales volume/ASP/EBITDA down by -20.1/-18.9/-1.4/-19.9% YoY. The performance was slightly lower than the bank's expectations, mainly due to a significant decrease in sales volume in the Chinese region affected by a weak consumption environment. Development trends Chinese region: weak demand, high base, 4Q24 volume and price under pressure Volume: In 4Q24, the sales volume in the Chinese region declined significantly, performing weaker than the industry, primarily due to 1) the company actively reducing inventory (accounting for a third of the sales volume decline); 2) insufficient industry demand, overall industry sales under pressure; 3) poor performance of the company's advantage channels in the current drinking scenes; 4) the high base of sales growth in the same period last year. Price: The higher degree of product high-endization in the current drinking scenes had a significant impact, with the company's China region ton price down by 1.4% in 4Q24. Overall, in 2024, the company's Chinese region volume/price decreased by -11.8%/-1.4% YoY, leading to a 1.49% decrease in the company's market share in China in 2024. By the end of 2024, the distribution cities for Budweiser had expanded from 220 in 2023 to 235, with the number of distribution cities for the super-premium product portfolio decreasing from 63 in 2023 to 56. Other regions: India continues its growth trend, Korea's market share further increases In 4Q24, the Indian market's revenue continued to grow, with high-end and super-premium product revenue growing by nearly 20% YoY, and market share doubled in five years. In 4Q24, the revenue/sales volume/ASP/EBITDA in the Asia-Pacific region increased by +7.8/+8.5/-0.6/+17.0% YoY, with the Korean market experiencing high unit growth in revenue and sales volume in 4Q24, mainly supported by the advantage of the brand portfolio, leading to a further increase in market share. Outlook for 2025: New CEO appointed, target market share growth in China Regionally, the company plans to achieve market share growth in the Chinese region by leveraging brand portfolio and channel advantages, focusing on the Budweiser series and Harbin beer layout, and placing emphasis on non-immediate consumption channel construction; in Korea, continued investment in products like Cass to promote high-endization and enhance profitability; in India, growth driven by high-end and super-premium products such as Budweiser and King of the North. On the cost side, the company's ton cost remained relatively stable in 2024, with the weakening scale effect from the decline in sales volume offsetting the downward contribution of costs. The bank believes that barley and other raw material prices are expected to remain at low levels in 2025, and if sales volume increases, the scale effect is expected to help improve profit margins. Risk Warning: Slowing upgrade trend leading to lower-than-expected high-endization, rising costs, intensified market competition, food safety issues, etc.