Blue Moon Earnings: Lackluster Results Suggest a Lower Medium-Term Growth Outlook

After disappointing first-half results, we cut our fair value estimate for narrow-moat Blue Moon to HKD 3.60 from HKD 6.60. We also lower our longer-term sales growth projections due to uncertainty around the growth outlook for its major product segments. The company mentioned the potential of expanding into other new personal care categories, but we remain neutral until there are more tangible signs. We now project an average annual sales growth rate of 5.8% from 2024 onward and a five-year net profit CAGR of 4.8%. The implied multiple, at 24 times 2024 price/earnings, is now closer to that of international peers, due to slower medium-term growth. We look for more consistent improvement in channel execution that flows through to the bottom line before revisiting our long-term view. We see Blue Moon shares as fairly valued.