Budweiser APAC: Superpremium Segment the Long-Term Growth Driver for APAC West; Shares Undervalued

We attended narrow-moat Budweiser APAC’s 01876 investor day in Wenzhou, China during which the company communicated medium- to long-term growth strategies for its major markets. Management aims to increase the superpremium (above CNY 12) segment, expand city coverage, and increase efficiencies through its digitalized Bees platform. We reiterate our constructive view of Budweiser APAC’s ability to maintain its leadership in the premium beer segment in China through its rich brand portfolio and capabilities in channel execution. We are also positive about its strategy to expand the superpremium segment, which is set to drive a significant share of the company’s revenue and gross profit growth in the long term. We moderately lift our steady-state price/mix growth estimate for the APAC West segment, but our fair value estimate of HKD 24 per share is unchanged, which implies 17 times 2023 enterprise value/EBITDA. We continue to like Budweiser APAC over other beer brands under our coverage and think the stock is undervalued.