Bank of America Securities: Uncertainty over the elimination of the goodwill impairment of China Resources Beer (00291); target price at 35.6 Hong Kong dollars.

Bank of America Securities released a research report stating that based on three key reasons, it maintains a "buy" rating on CHINA RES BEER (00291) with a target price of HK$35.6: 1) CHINA RES BEER's market share is still expanding as it actively addresses fragmented channels and diversified demand; 2) The stock has been a clear laggard in the Chinese consumer goods sector over the past six months, and with short-term uncertainties dissipating, the stock price is expected to catch up; 3) The bank sees three catalysts that could drive a potential re-evaluation of the second-quarter valuation, including the potential recovery of the catering channel, the peak season in the second quarter, and the World Cup in June. The bank plans to review profit forecasts after the final results are announced. Concerns about potential impairment of goodwill have been a major uncertainty over the past six months in the current downturn of the liquor industry. The bank views CHINA RES BEER's profit warning as an event to dispel doubts. This impairment accounts for about 40% of the 7 billion RMB goodwill related to Jinsha, which was larger than expected. Whether Run Beer will further provide impairment in 2026 depends on the fundamentals of the liquor industry. At least for now, the bank believes that this amount has been included in conservative assumptions. CHINA RES BEER's core beer business remains healthy, and it is expected that the revenue and attributable net profit to shareholders of this segment will grow by low single digits and over 10% year-on-year in 2025. Channel checks show that among the top three beer companies in China, CHINA RES BEER may be the only one to record positive sales growth from the beginning of 2026. The bank expects that the non-cash impairment will not affect dividends, and the dividend payout ratio in 2025 will be higher than in 2024 (52%).