\u3000\u3000 Tsingtao Brewery Company Limited(600600) (600600)
The high-end space may be smaller than that of the main competitors: we recognize the strong brand power and wide audience of Tsingtao beer in China's high-end beer market. Its long brand history makes it have a strong national trend among domestic beer players. However, we must also be soberly aware that Tsingtao beer has some problems, such as (1) high proportion of high-end products, (2) weak high-end product portfolio, lack of international brands, and (3) single brand coverage and multiple price bands. These problems are likely to bring some limitations to the process of high-end beer in the future. This also explains why the growth rate of high-end products of Tsingtao beer has been slower than that of China Resources and heavy beer in the past few years.
The base market is facing fierce competition: Although Tsingtao Beer covers the national market, Shandong still contributes about 56% of the company's revenue and 60% of its net profit. However, China Resources recently entered the Shandong market with its high-end beer brand and opened a new plant (700000 kiloliter capacity) in Zhangqiu, Jinan in July this year, which fully shows China Resources's ambition for the Shandong market. We do not rule out that China Resources has the ability to occupy the share of Tsingtao beer in Shandong's high-end beer market.
The effect of introducing strategic investors is not good: Tsingtao beer has introduced strategic investors many times in its history (including Budweiser InBev, Asahi and Fosun Group), but the effect is not good every time, so it can not produce effective synergy. This also shows the gap between Tsingtao beer and China Resources in capital operation. Fosun has reduced its holdings for many times since becoming a shareholder of Tsingtao beer at the end of 2017. This also has a negative impact on the share price of Tsingtao beer.
Valuation: we use 16xev / EBITDA (the premium level of 30% relative to the average valuation of international brands) to value the H shares of Tsingtao beer, and get the target price of HK $86 (16.5% upside compared with the current share price); We use 23x2022eev / EBITDA (45% premium relative to H shares) to value Tsingtao Beer A shares, and get the target price of 95 yuan, which is basically the same as the current share price.
Investment risk: downside risks include: (1) slowdown in overall industry demand; (2) Shandong's market share has been occupied; (3) The epidemic has repeatedly and continuously affected the catering industry; (4) The price rise of raw materials is higher than expected; (5) Fosun reduced its holdings on a large scale again. Upward risks include: (1) ease of industry competition; (2) The impact of the epidemic weakened; (3) Sales of high-end products were better than expected.
