Budweiser APAC Earnings: Distribution Strength Remains Intact Despite Near-Term Industry Headwinds

Narrow-moat Budweiser APAC reported 2023 results that largely met our expectations and reflected a softening volume trend across China and South Korea in the second half. But price growth was above our estimates, especially in China, despite concerns about soft consumer sentiment affecting premium beer demand. We only moderately lowered our 2024 earnings forecasts by 6% after cutting volume projections in China. The share price has reacted negatively to the results, with the bottom line being fractionally below consensus. The market could continue to worry about soft consumer sentiment in China in the near term. We tone back our fair value estimate to HKD 18.50 per share from HKD 21, as we assume a lower long-term EBI growth in China. Nonetheless, we think Budweiser’s distribution strength remains intact, which is conducive to medium- to long-term premiumization efforts. While shares remain undervalued, we think the market could stay cautious toward the stock in the near term, given its large exposure to the premium beer segment.