\u3000\u3000 Beijing Yanjing Brewery Co.Ltd(000729) (000729)
We covered Beijing Yanjing Brewery Co.Ltd(000729) (000729. CH) for the first time and gave the first "sell" rating. The target price was RMB 7.6, with a potential decrease of 7.7%.
Compared with its rivals, Yanjing lacks the support of foreign capital and brand operation: Yanjing has been overtaken by its rivals in the tide of mergers and acquisitions in China's beer industry and the introduction of foreign investors. So far, it has not introduced international beer players as strategic investors, which makes the company inferior to its rivals in terms of capital strength, brand expansion and operation, operation and management ability, It also changed it from an industry leader to a regional player.
The lack of a strong product portfolio makes it difficult to meet consumption upgrading: Yanjing's product portfolio needs to be improved in three aspects: 1) weak brand strength, (2) low product positioning, and (3) lack of international brand support. Although the growth rate of U8 is fast, its scale is small and not enough to turn the tide. The defects of the product portfolio will continue to hinder the high-end process of Yanjing to a great extent and limit the increase of the company's unit price and gross profit margin.
The base market faces fierce competition: we estimate that Beijing contributes about one-third of Yanjing's revenue. We believe that Beijing, as one of the cities with the highest per capita consumption capacity in China, has great consumption upgrading potential. With the continuous reduction of low-end channels and the continuous entry of high-end brands into the Beijing market, Yanjing's dominant position in Beijing may be shaken.
Valuation: we use 13x2022eev / EBITDA (a discount of 30% relative to the average valuation of international brands) as the valuation of Beijing Yanjing Brewery Co.Ltd(000729) , and get the target price of RMB 7.6, which has 7.7% room for decline compared with the current stock price.
Investment risk: 1) the high-end process of China's beer market slows down; (2) U8 growth rate is much higher than expected; (3) The R & D capacity of high-end products has been greatly improved; (4) The price rise of raw materials is lower than expected; (5) Equity incentive or restructuring of the company's equity structure.
