Asahi Earnings: European Beer Mitigates Domestic and Australian Beer Weakness; Retain Fair Value

Narrow-moat Asahi Group’s September-quarter earnings were mostly in line with our expectations. The European beer business posted strong growth thanks to price hikes and better cost control. The domestic business was still somewhat bumpy, while the Australian beer business continued to struggle. Management noted the challenge to achieve its full-year operating profit guidance, which we think would be mainly due to its Australian business. We maintain our 2024 operating profit projection, which is moderately below the company’s guidance. Our fair value estimate remains unchanged at JPY 2,200 per share, which implies 17 times 2025 price/earnings, 10 times enterprise value/EBITDA, and a dividend yield of 2.2%. We view Asahi’s shares as undervalued, given its long-term competitive advantages in domestic and overseas beer markets.