Blue Moon: Price Discounts Remain a Drag on the Bottom Line; Fair Value Estimate Maintained

We keep our 2024 earnings forecast for narrow-moat Blue Moon after reviewing its November online sales trend. We continue to expect strong top-line growth in the second half following the firm’s expansion in livestreaming platforms. However, we anticipate that margins remain depressed due to heavy discounts. We retain our fair value estimate of HKD 2.55 per share, which implies 44 times 2025 price/earnings and 15 times enterprise value/EBITDA. We see the stock as overvalued, with demanding valuations. We foresee soft consumer sentiment to weigh on the selling prices of Blue Moon’s products at least through the first half of next year. As a result, we expect the sales and marketing expenses ratio to stay elevated at 47% in 2025, compared with the average of 34% between 2019 and 2023.