CR Beer To Benefit From On-Trade Channels Reopening in 2023; Retaining FVE at HKD 58

Narrow-moat China Resources Beer, or CR Beer, reported 2022 results that met our below-consensus estimates on revenue, but exceeded our estimates on net profit. Better-than-expected cost-savings drove the bottom line beat in 2022. Management remained upbeat on a beer revenue and profit rebound in 2023, consistent with our expectations. The company also shared its view on the recently acquired baijiu business, which we would sum up as constructive on the long term, but requires patience in the near term. We have raised our 2023 sales and profit estimates on a better beer segment outlook, but left our fair value estimate unchanged at HKD 58 per share, which implies 16 times 2023 enterprise value/EBITDA. We think its share price is fairly valued, though in the near term, the market could view the stock as benefiting from the rebound in consumption in China, therefore driving short-term momentum.