Daiwa Research lifted its target price for Tsingtao Brewery (00168) to HK$45.9 from HK$33.9, and maintained its "hold" rating.
The research house views Asahi Group's recent sale of its stake in Tsingtao as slightly negative due to the low transaction price (HK$7.22/share) and Tsingtao's failure to meet
expectations to rapidly upgrade its product mix by cooperating with an international partner.
Compared with China Resources Beer (CRB)(00291), Daiwa said Tsingtao is more vulnerable to the expansion of imported beer brands in China, due to its greater revenue exposure to high-end markets (20% market share) and coastal regions (eg, Shandong and Shanghai), where imported brands have wider distribution than domestic brands and are more aggressive in
marketing due to their higher ASPs.
Daiwa revised up its 2018-19 EPS by 4-11% on higher ASP assumptions, but it believes that Tsingtao still lags its peers in terms of pace of ASP growth. Moreover, it forecast Tsingtao's sales volume to expand by 1% in 2018, versus 2% for CRB.
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