In-Line Q4 for Ambev but Concerns Over Short-Term Margins Create Entry Point

Ambev wrapped up 2020 on strong footing, with decent fourth quarter and full year results that were largely in line with our forecasts. Fourth-quarter volume in the Beer Brazil segment increased by 12%, a remarkable turnaround from the double-digit declines of the first half of the year. As we stated in our third-quarter earnings note, however, short-term margins are likely to come under pressure from commodity cost inflation next year, but we see no reason why margins can't rebound in the medium term. We are reiterating our wide moat rating and our BRL 18 fair value estimate, and on that basis, we think the stock is materially undervalued.