Growth in 2023 Hinges on Channel Execution, but Lower Costs Are a Tailwind; Reducing FVE To HKD 6.60

Narrow-moat Blue Moon reported 2022 results that missed Refinitiv consensus and our estimates on the top line and net profit. The company attributed the profit miss to higher channel investments that did not bear fruit as well as elevated input costs. But management is optimistic about a potential sales recovery and that costs will become more favorable in 2023. We have reduced our fair value estimate to HKD 6.60 per share (from HKD 7.40 per share) due to lower 2023 top-line and profit projections, but continue to consider the stock undervalued. Our fair value estimate implies 31 times 2023 P/E and 3.8% dividend yield. We think the company can benefit from offline sales growth and lower input costs in 2023, thereby expanding its margins.