[ET Net News Agency, 9 July 2018] Credit Suisse lifted its target price for Tsingtao
Brewery (00168) to HK$48 from HK$47, and upgraded its rating to "outperform" from
"neutral" after the share-price correction.
The research house forecast Tsingtao' s net profit to grow by 5% and 20% in 1H and
full-year 2018, respectively, as Tsingtao's price hike take places mostly in the second
quarter and benefits should reflect more in the latter half of the year.
Credit Suisse believes Tsingtao should also benefit from improving competitive
environment in the China beer market. Although Fosun's (00656) entry as a strategic
investor may not bring immediate benefit to the company, its 11x FY2019 EV/EBITDA seems to
be attractive compared to its 15% EPS CAGR for 2017-20.
On a recurring basis, Credit Suisse believes Tsingtao's net margin troughed in 2017 to
5.1% and it should continue to expand to 5.7% and 6.3% in 2018 and 2019, respectively. It
expects continued YoY margin expansion in the next few quarters, which should give strong
support to the share price. (KL)