CICC: Lowers Budweiser Asia Pacific (01876) target price by 18.4% to HK$8 to maintain “outperforming the industry” rating

The Zhitong Finance App learned that CICC released a research report stating that it maintained the Budweiser Asia Pacific (01876) “outperforming the industry” rating, downgraded the company's 2026 and 2027 EBITDA forecasts by 9.6%/4.2% to $1,329/US$1,448 billion, and lowered the target price by 18.4% to HK$8.00 due to declining profits affecting long-term dividend expectations, corresponding to 8.1 times and 7.4 times EV/EBITDA in 2026 and 2027, with 41.3% upward space compared to the current stock price. The company's results for the third quarter of 2026 are basically in line with the forecast. Sales volume fell 10.1% year on year, average selling price (ASP) increased 1.9% year on year, revenue fell 8.4% year on year, and normalized EBITDA fell 22.9% year on year. These are all endogenous growth rates.

CICC's main views are as follows:

Results for the third quarter of 2026 are largely in line with expectations

The company announced results for the third quarter of 2026. Sales volume, ASP and revenue decreased by 10.1%, 1.9%, and 8.4% year-on-year respectively. Subregionally, sales volume, ASP, and revenue in the Asia-Pacific region decreased by 11.4%, up 1.8%, and 9.8%, respectively. Among them, China decreased 16.8%, 0.1%, and 16.9%, respectively; sales volume, ASP and revenue in the Asia-Pacific region decreased by 3.1%, 1.0%, and 4.1% year-on-year, respectively.

In terms of normalizing EBITDA, overall, Asia Pacific West and Asia Pacific East respectively declined by 22.9%, 26.3%, and 13.9% year-on-year, with China falling 30.2% year over year. The above are all endogenous growth rates, and the performance is basically in line with this forecast.

Weak demand and inventory removal in the third quarter dragged down sales in China, which was slightly hedged by steady overseas performance

In the third quarter of 2026, the company's sales volume, tonnage price and revenue decreased by 10.1%, 1.9% and 8.4% year-on-year respectively. Among them, China decreased 16.8%, 0.1%, and 16.9%, respectively. The bank believes that weak restaurants, rainy weather, and the company's inventory removal are dragging down sales; structural upgrade dividends are being offset by increased distribution through non-current drinking channels, and the tonnage price is basically flat.

Overseas, sales in high-end and above categories continued to grow by double digits in the third quarter in the Indian market; sales volume, tonnage price and revenue in the third quarter of 2026 in the Asia-Pacific region decreased by 3.1%, 1.0% and 4.1%, respectively, and the performance was superior to the overall performance of the industry.

Cost pressure and rigid operating leverage dragged down third-quarter profits

In the third quarter of 2026, the company's normalized EBITDA fell 22.9% year over year. Mainly due to: 1) sales pressure in China weakens the scale effect, compounding commodity price increases, and the cost per ton increased 7.9% year on year; 2) O2O channel distribution expenses in China increased by 7% year on year, driving sales, general and administrative expenses (SG&A) to increase 7% year over year.

In addition, China's internal restructuring resulted in income tax expenses of 52 million US dollars, and India provided 30 million US dollars in related receivables, which dragged down net profit.

After the peak season, the company may mainly adjust at the bottom this year

The company's high-end product matrix is highly competitive, and continues to improve the layout of non-fresh drinking channels to enhance competitiveness. The bank believes that the company is expected to show greater flexibility when demand is repaired.

Risk Alerts

Rising raw material costs; poor price increases; high-end competition intensifies; recovery of drinking channels falls short of expectations; food safety, etc.