Tsingtao’s 2022 Bottom Line Beat, and Profit Is Set To Grow Further in 2023; Raising FVE

Narrow-moat Tsingtao Brewery reported results for 2022 in which the top line met market expectations and the bottom line beat Refinitiv consensus. Gross margin grew moderately year on year despite the higher cost environment, as the company was able to deliver price/mix growth. We lift our fair value estimate to HKD 80 from HKD 74 as we raise our medium-term net margin estimates on better execution in cost control. Our fair value estimate implies 12 times 2023 EV/EBITDA, moderately below the 10-year average of 14 times. We think Tsingtao Brewery’s share price could enjoy near-term momentum as the company demonstrates the ability to control cost and deliver price/mix growth, but we regard the shares as being fairly valued. We reiterate our view that consumers are willing to spend on catering services after the lifting of pandemic restrictions, a tailwind for premium beer demand.