Ambev Reports Marginal Upside to Gross Margin in Q4 FY 2022 as Price Increases Appear to Stick

Ambev reported a robust gross margin in the fourth quarter; an encouraging sign that consumers in its core markets will be willing to absorb some of the rising costs of raw materials in the coming quarters. We are reiterating our BRL 18 fair value estimate and wide moat rating. While we expect some volatility in Ambev's stock as inflation takes a short-term bite out of margins, we regard Ambev as being a very high-quality franchise that is currently undervalued.