CMSC: BUD APAC (01876) The Chinese market has not shown signs of recovery, target price revised down to HKD 7.1.

CMSC released a research report stating that BUD APAC (01876) second-quarter performance reflects a trade-off between market share defense and profitability, with significant regional performance differentiation. Total shipment volume decreased by 4.1% year-on-year, and revenue fell by 2.1% year-on-year, while revenue per hundred liters increased by 2.1% year-on-year. Adjusted EBITDA dropped by 9.7% year-on-year, and the EBITDA margin contracted by 210 basis points to 27.6%. The performance was dragged down by the Chinese market, while Korea and India showed strong performance but were insufficient to drive a reevaluation. The firm believes that the risk-return ratio is roughly balanced and maintains a "hold" rating until organic recovery in China is observed, with the target price lowered from HKD 7.8 to HKD 7.1. The Chinese market remains a core issue. Shipments in the second quarter decreased by 9.7% year-on-year, and there are no signs of recovery in dine-in channels, with July demand still weak, leading management to take a cautious stance for the third quarter. Management confirmed that even though some competitors are raising prices in certain regions, there are no plans for a price increase; the priority is to stabilize shipments and rebuild market share, with investments expected to continue into the second half of the year. Additionally, aluminum prices rising by 10% to 20% will bring delayed cost pressures in the second half of 2026 and 2027, and management also acknowledged that if profits do not improve, the current dividend is difficult to maintain.