Hong Kong Stock Market Review: China Resources Beer hitting a new low
China Resources Beer stock price hit a new low despite record high interim profits, with revenue slightly down to 23.7 billion and sales volume dropping by 3.4%. Sales of high-end products accounted for half of the sales for the first time, and management acknowledged consumer contraction, adjusting sales volume expectations to a single-digit decline, with future progress in high-end transformation slowing down. Management hopes that the liquor business will contribute to a 30% revenue growth. Despite a low valuation of 14 times PE and a dividend yield of approximately 3.5%, the attractiveness is insufficient
Interim report shows record high profits, but China Resources Beer's stock price plunges to a new low, indicating a clear market sentiment.
In the first half of the year, the company's beer sales volume decreased by 3.4% year-on-year to 6.348 billion liters, with the decline concentrated in low-priced products. Sales of mid-to-high-end products accounted for over half of the total revenue for the first time, and sales of second-tier and above products also saw a single-digit growth, reflecting a certain degree of development towards the high-end market.
Revenue for the period fell by 0.5% to 23.7 billion, performing better than sales volume, while profits increased by 1.2% to 4.7 billion. The company's dividend payout ratio increased from 20% in the same period last year to 26%, with an interim dividend of 0.373 yuan, up 30%.
It is worth noting that the management also acknowledged for the first time the phenomenon of consumer contraction, lowering the previous slight positive growth expectation for beer sales this year to a single-digit decline. The company will continue to adhere to its high-end strategy, but also acknowledges that the pace of future high-end development will slow down. As for the previously acquired liquor business, the management's target is a 30% year-on-year revenue growth, but the contribution scale has always been too small.
In short, consumer weakness in the first half of the year was originally expected to be offset by the peak season in July and August to achieve the annual sales growth target, but it is clearly unattainable. Amid overall consumer contraction, the market doubts that beer upgrades cannot offset the decline in low-priced products. Moreover, with consumers returning to rational consumption, high-end products need to be more cost-effective to be competitive, which will not significantly help profits.
Furthermore, although the company's current valuation has dropped to 14 times PE, the annualized dividend yield is only about 3.5%. While the management has indicated that they are studying the possibility of share buybacks, the attractiveness of the stock in the Hong Kong market remains insufficient