Blue Moon Earnings: Elevated Sales and Marketing Costs Damped Profit

Narrow-moat Blue Moon reported 2023 results with revenue in line with Refinitiv consensus and our estimate. Gross margin was a beat, but net profit was lower than expected, dragged by elevated expenses ratio. Consequently, we have reduced our fair value estimate to HKD 2.80 per share from HKD 3.10, after incorporating higher operating expenses ratio forecasts through 2028, which cut our 2024-27 earnings by 3%-7%, despite leaving the top-line growth estimates largely unchanged. Although the shares are currently undervalued, we think investors could remain sidelined until the company executes concrete margin expansion strategies.