China Resources Beer (291)

Business Summary:

The Group, which is a beer listed subsidiary company of China Resources (Holdings) Company Limited (“CRH'),  is principally engaged in retail, beer, food and beverage businesses. The principal activities of the Company are investment holding and property investment. In 2019, the Group has completed the transaction and commenced the strategic partnership with the Heineken Group. Last year, the group launched a number of new brands including the super-premium product “Li”, the premium product “L owen Fruit Beer”, the carbonated beverage “Snow Xiao Pi Qi” and international brands “Amstel” and “Edelweiss”.   In December 2021, she became a Hang Seng Index constituent, making it the first blue chip Chinese beer product manufacturer.

Financial Summary:

The Group's consolidated turnover in 2021 was RMB33,387,000,000, which increased by 6.2% year-on-year. The Group’s consolidated profit attributable to the Company’s shareholders and earnings before interest and taxation in 2021 increased by 119.16% and 94.6% to RMB4,587,000,000 and RMB5,991,000,000 respectively compared with 2020.

The group's overall beer sales volume was approximately 11,056,000 kilolitres in 2021 with nearly no change compared with 2020.  Of which, the sales volume of the sub-premium beer segment and above reached 1,866,000 kilolitres in 2021, increased by 27.8% year-on-year.
 

Net cash flows from operating activities increased 17.0% from RMB4,614 million to RMB5396 million. Basic earnings per share increased by 116.9% from RMB 65 cents to RMB 141 cents. Overall gross profit margin increased by 0.8 % to 39.2%.

Risk:

(a) the outbreak of coronavirus may have affected the sales of  beery product.

(b) impairment on trade and other receivables depends on if there has been a significant increase in credit risks from customers and/or since the initial recognition.

(c ) exposure to RMB currency fluctuations and any related hedges

(d) gross profit margin may be affected by raw material price volatility

(e) China Resources Beer ranks the highest P/E ratio of 60 among major beer company, even higher than Bud Apac (01876.HK) of ratio: 36 and Tsingtao Brew of ratio:31. Besides, she ranks the highest P/B (ratio: 6); nearly double than Bud Apac and Tsingtao Brew (both at ratio:3)

(f) higher-than-expected cost for material sourcing, production cost & network expansion may occur.

Technical Analysis:

The stock prices hit historic high of $78.6 on January, 2021. The price has dropped by 46.6% to recent-low of $41.95.  It is suggested to buying at the present price below $46.0. The target price for medium term is $52. Cut-loss price will be $42.

References

www.hkex.com.hk

www.etnet.com.hk

www.afe-solutions.com

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.