CR Beer's 1H Largely In Line; Strong Summer Sales Drive Accelerating Second-Half Growth

No-moat China Resources Beer’s, or CR Beer’s, first-half results delivered no major surprises. Revenue growth was in line with expectations, while the decent 17% year-over-year adjusted EBIT growth (excluding one-offs) beat our estimates slightly, owing to lower sales and marketing expenses amid widespread lockdowns in the half-year. Management made little change to its full-year sales and marketing plans, and we believe spending will catch up in coming quarters, as COVID-19 lockdowns ease. As such, we maintain both our fair value estimate of HKD 52 per share, and full-year net profit forecast of CNY 4.2 billion, which implies an accelerating sales growth in the second half. And we think pent-up demand for socializing (coinciding with a hotter summer), a solid premiumization trend, and a slightly weakened cost outlook, are pointing to an improved second-half performance. We think the shares are fairly valued presently, with the current 20 times 2022 EV/EBITDA as of Aug. 17, up from the 16 times as of the end of June, appropriately reflecting an improvement from the first-half environment.