CR Beer Earnings: Subpremium Beer Drove Profit Growth; Decent Progress in Baijiu Restructuring

Narrow-moat China Resources Beer, or CR Beer, reported full-year 2023 results that exceeded our estimate on net profit but missed on the top line. While beer volume growth was below our projection, price/kiloliter came in better than expected. The subpremium beer portfolio continued to drive improvement in profit/kiloliter for the company. CR Beer’s baijiu segment results also highlighted the focus on lowering channel inventories and maintaining price stability in 2023. Although we reduce our five-year revenue compound annual growth rate by 2 percentage points to 7% to factor in lower beer pricing and baijiu sales, we retain our net income projections as we anticipate better cost savings from the synergies of the beer and baijiu businesses. We like the execution on consolidating Jinsha Winery thus far and view management’s strategies constructively.