Chongqing Brewery: Headwinds in Catering Channels Could Be a Near-Term Overhang; Retain FVE

We recently spoke with the management of Chongqing Brewery and reduced our 2023-24 earnings forecasts by 4% to 9%. We retain our fair value estimate at CNY 78, which implies 25 times 2024 P/E. While we think the company’s near-term sales will be pressured by soft consumer confidence, we remain constructive on the longer-term competitive advantage of Chongqing Brewery. We believe the modest profit growth in 2024 may affect investors’ buying interests, but we think the firm is undervalued at the current price. We like Chongqing Brewery’s geographical and brand mix, which is defensive amid industry downturns and conducive to growth when consumer sentiment picks up.