CR Beer Earnings: Lower Our FVE by 5% as Firm Misses 2024 Profit; Recovery in Beer Demand in Sight

Narrow-moat China Resources Beer’s 2024 earnings trailed our estimates on net income, primarily due to higher sales and marketing expenses as well as lower nonoperating income. Management highlighted positive volume growth in early 2025 despite a high base. We think the company could maintain momentum in the first half as it cycles a lower base from March onward. We reduced our 2025-28 net income forecasts by 5%-9% to account for lower nonoperating income and higher tax rates. Accordingly, we lowered our fair value estimate to HKD 38.50 per share, from HKD 40.50 per share. However, we still see shares as undervalued with an estimated 2025 dividend yield of 3.6%. We are expecting a payout ratio of 60%, in line with management guidance. We think the volume recovery experienced by CR Beer could signal an improvement in consumer sentiment throughout 2025.