Excluding fixed asset impairment loss, FY20 adj. NP rose 18% to RMB2,332mn, 5%/6% above our est./consensus, mainly due to lower-than-expected administrative expenses. Premiumization and efficiency enhancement remain key growth drivers. Our TP for H-share and A-share were raised from HK$78.10 to HK$85.45 and from RMB78.70 to RMB81.62, respectively. Maintain Buy on H-share and Hold on A-share.
- Results highlights. Revenue dropped 1% to RMB27.8bn, in-line. Sales volume fell 3% due to pandemic. Sales mix of on-premise channel decreased from 60% to 45%. High-end beer sales mix slightly decreased 0.2ppt to 22.9%. The Company accelerated online channel development to mitigate impact by pandemic. GPM widened 1.4ppt to 40.4% driven by 1.1ppt decrease of raw materials costs ratio. SG&A expenses ratio dropped 1ppt to 24.0% mainly due to savings from social security expenses. Dividend per share jumped 36% to RMB0.75. Payout ratio rose from 40% to 46%. The Company had RMB17.8bn net cash (+18%) as at 31 Dec 2020.
- Premiumization accelerated in 4Q20. 4Q20 revenue growth accelerated to 8% from 5% in 3Q20, led by 5% ASP growth (vs 2% growth in 3Q20). We think ASP recovery was led by more high-end sales from the recovery of nightlife and catering channel.
- Sector recovered in 2M21. Sector production volume jumped 61% YoY to RMB5.04mn kL in 2M21. Compared to 2M19, we estimate volume decline was ~3%, the decline was narrowed compared to ~10% in 4Q20.
- Premiumization and efficiency enhancement are key growth drivers. The Company will accelerate its product mix upgrade to ride on premiumization trend. Also, it will accelerate the development of smart factory and smart supply chain and eliminate outdated capacity to enhance efficiency. By raising product prices, enhancing product mix, increasing efficiency and increasing sales volume, the Company aims to achieve high quality development.
- Maintain Buy. We fine-tuned our FY21/22E adj. NP estimates by 2-3% to factor in lower administrative expenses ratio. We forecast the Company to deliver 14% adj. EPS CAGR in FY20-23E. Our TP for H-share was raised from HK$78.10 to HK$85.45, still at 36x FY21E adj. P/E. Maintain Buy. Our TP for A-share was lifted from RMB78.70 to RMB81.62, still at 41.0x FY21E adj. P/E. Maintain Hold. Catalysts: better-than-expected revenue and margins. Risks: costs pressure, keen competition and food safety issues.
