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Tsingtao Brewery Co Ltd Class H 00168

Morningstar Rating
HKD 53.80 +1.10 (2.09%)
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Company Report

Tsingtao Earnings: Slowing Volume Dragged Results, but Selling Price Beat Expectations

Narrow-moat Tsingtao Brewery reported 2023 results that fractionally trailed our estimates, due to lower volume sales and higher selling expenses. Gross margin, however, beat our expectations. Price growth in 2023 was driven by core regions in Northern China, consistent with our view that the company has stronger levers to improve the product mix in its core regions due to its dominant market position. We lowered our volume growth expectations but raised our price/ton estimates through the explicit forecast period, resulting in a minor earnings cut of less than 3% through 2028. We retain our fair value estimate at HKD 78 per H-share (CNY 72 per A-share), which implies 22 times 2024 price/earnings, 11 times EV/EBITDA, and 3% dividend yield. While investors could be concerned about volume momentum slowing in the near term, we think the company’s distribution strength in its core regions remains intact. We see shares as undervalued at the current price.

Price vs Fair Value

00168 is trading at a 32% discount.
Price
HKD 53.15
Fair Value
HKD 12.00
Uncertainty
High
1-Star Price
HKD 146.10
5-Star Price
HKD 25.20
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Tsingtao Brewery’s dominant market position and distribution strength in Shandong allow the company to maneuver on product mix.

Bears

Tsingtao lacks competitive international brands in its portfolio, which puts the company at a disadvantaged position against China Resources Beer, Budweiser APAC, and Chongqing Brewery in the premium segment.

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News

Trading Information

Previous Close Price
HKD 52.70
Day Range
HKD 52.1054.80
52-Week Range
HKD 42.8587.40
Bid/Ask
HKD 53.75 / HKD 53.80
Market Cap
HKD 73.39 Bil
Volume/Avg
3.3 Mil / 4.2 Mil

Key Statistics

Price/Earnings (Normalized)
17.24
Price/Sales
1.95
Dividend Yield (Trailing)
2.66%
Dividend Yield (Forward)
2.66%
Total Yield
2.66%

Company Profile

With over 100 years of history, Tsingtao Brewery has become one of the leading brewers in China with its namesake Tsingtao brand. The company has a dominant position in its core market, Shandong province, which contributed over 60% of its revenue and net profit in 2022. Unlike other major brewers, Tsingtao Brewery’s brand umbrellas consist entirely of domestic brands. The Tsingtao brand has a mid-range to high-end market positioning and contributed over half of its volume whereas the mass market Laoshan brand targets the mainstream segment, with a declining volume mix as the company sought to premiumize its portfolio in recent years.
Sector
Consumer Defensive
Industry
Beverages - Brewers
Stock Style Box
Large Growth
Total Number of Employees
30,687

Competitors

Valuation

Metric
00168
HEIA
00291
Price/Earnings (Normalized)
17.2419.1819.55
Price/Book Value
2.432.663.52
Price/Sales
1.951.672.72
Price/Cash Flow
15.2210.9820.14
Price/Earnings
00168
HEIA
00291

Financial Strength

Metric
00168
HEIA
00291
Quick Ratio
1.270.480.55
Current Ratio
1.750.770.89
Interest Coverage
319.924.8051.07
Quick Ratio
00168
HEIA
00291

Profitability

Metric
00168
HEIA
00291
Return on Assets (Normalized)
7.39%8.74%
Return on Equity (Normalized)
13.82%19.62%
Return on Invested Capital (Normalized)
11.99%15.82%
Return on Assets
00168
HEIA
00291
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