Key investment points
The rise in barley prices has limited impact on profits in the short term. Around the second quarter of 2020, the prices of main raw materials and packaging materials in the beer industry have entered the upward range, and the cost side of beer enterprises is gradually under pressure; The outbreak of the conflict between Russia and Ukraine in February this year led to the rise of international barley prices again. As the barley used by Chinese beer enterprises is basically imported from abroad, the market’s anxiety about the cost pressure of the beer industry has increased. We believe that the impact of this round of barley price rise on the cost of beer enterprises in the short term is not as pessimistic as market expectations. It is mainly considered from two aspects: 1) beer enterprises have a certain inventory of the main raw material barley, and will adopt strategies such as locking the price, prolonging the procurement cycle and opening up new suppliers to deal with the cost rise. According to channel feedback, Chongqing Brewery Co.Ltd(600132) has basically completed the annual barley price lock, and Tsingtao Brewery Company Limited(600600) has partially completed the barley price lock. Therefore, the impact of barley price rise on the cost of beer enterprises is weak in the short term; (2) Although barley is the main raw material for beer brewing, its proportion in the total cost of beer is not prominent, generally accounting for 10% ~ 14% of the total cost of beer enterprises. According to our calculation (using the industry median), for every 1% increase in barley price, the net profit of beer enterprises will decrease by about 0.56%, and the enterprises with high net interest rate will be less affected.
The price rise of packaging materials is slowing down, and the marginal impact on profits is improved. As the main packaging materials, glass bottles and aluminum cans account for the majority of the total cost of beer enterprises, accounting for about 30% / 12%. The actual proportion is slightly different according to the difference of canning rate of enterprises. In terms of glass, the prices of raw materials such as soda ash are gradually falling, and the inventory pressure caused by high production capacity is also forcing the glass price to weaken. Although the increase in demand in peak season may maintain the glass price at a high price, on the whole, the upward pressure on the price is slowing down, or will remain volatile and downward; On the other hand, for beer enterprises, glass bottles can be recycled for many times, which can reduce the impact of glass price to a certain extent. In terms of aluminum cans, affected by the dual control policy of energy consumption and the rise of raw ore prices last year, aluminum production capacity was restrained and prices rose sharply; We believe that the production capacity will gradually release and return to normal in 22 years, and the aluminum price may show a trend of high before and low after the whole year. Meanwhile, Chongqing Brewery Co.Ltd(600132) has locked the price of aluminum for 3 ~ 6 months, and Tsingtao Brewery Company Limited(600600) will also share the cost pressure with the can factory. It still has a certain inventory and strong bargaining power. It is expected that the annual cost of aluminum cans in the industry will increase by 10% ~ 15%.
In the long run, the high-end logic of the industry has not changed, and the price increase can also hedge the cost pressure. The epidemic broke out at the beginning of 2020. Now, the epidemic situation has not changed the overall trend of high-end beer industry. Although the sales volume of beer enterprises has been under pressure due to the impact of the epidemic in the past 20 years, the proportion of high-end beer enterprises remains stable; In 21 years, with the gradual improvement of the epidemic situation, the sales volume of high-end products has achieved rapid growth. We believe that with reasonable epidemic prevention measures, the epidemic situation is expected to be gradually alleviated, so that consumption will enter the channel of recovery. The improvement of beer enterprises’ own product structure and industrial price increase can effectively offset the impact of rising costs on enterprise profitability. At this stage, enterprises that can quickly improve the product structure and realize the smooth transmission of price increases can more calmly deal with the pressure of rising costs and the impact of the epidemic.
Investment suggestion: Based on the above, we mainly recommend Tsingtao Brewery Company Limited(600600) with excellent product quality and rich variety, as well as Chongqing Brewery Co.Ltd(600132) with popular single products and opening up the national market Tsingtao Brewery Company Limited(600600) has high product quality and rich product matrix. It is a leader in the medium and high-end of domestic brands. Its excellent R & D ability can also ensure that Tsingtao Beer keeps up with consumer demand. At the same time, Tsingtao beer is also accelerating the process of cost reduction and efficiency increase, and the improvement of net interest rate is worth looking forward to Chongqing Brewery Co.Ltd(600132) after the reorganization with Carlsberg China, it has two super single products, Wusu and 1664. We believe that driven by the high popularity of Wusu and 1664, Chongqing Brewery Co.Ltd(600132) can quickly open the market in the country and realize the sales volume of the overall brand; At the same time, heavy beer began to close the plant earlier and take measures to improve efficiency, such as energy conservation. The gross profit margin and net profit margin are at the leading level in the industry. Therefore, the impact of cost changes on heavy beer is relatively weak. In the medium and long term, in the transformation stage of China’s beer industry, Tsing beer and heavy beer can stand out and take the lead in seizing the market share of high-end products.
Risk tips: raw material prices rise more than expected, product upgrading is less than expected, industry competition intensifies, etc.
