On-Trade Recovery Boosting Asahi's Profits; SuperDry Relaunch Vital to Reviving Domestic Beer Sales

Narrow-moat Asahi’s fourth-quarter business profit came in 5% above our expectation, but the business profit guidance for 2022 is in line with our estimate. We foresee on-trade volume recovery will offset impacts of cost inflation, although the near-term profit outlook hinges on the development of COVID-19. We have lifted our fair value estimate to JPY 6,000 from JPY 5,400 after rolling our forecast period and view shares as undervalued, trading at 15% discount to our intrinsic value. With on-trade recovery being the growth engine over the next two years, whether premiumization in the off-trade channel will sustain while on-trade volume picks up will be a key factor to watch. We project Asahi’s profits will exceed the pre-COVID-19 level in 2024.