Budweiser APAC’s 2023 EBITDA Growth to Be Boosted by Surgical SKU and Digitalized Channel Management

Narrow-moat Budweiser APAC 01876 reported fourth-quarter results that missed Refinitiv consensus and our estimates on EBITDA but largely met consensus expectations on top-line growth. Rising costs pressure was compounded by disruption in on-premises channels in China, which led to operating deleverage and hence lower EBITDA margins. Strong growth in South Korea and India were insufficient to offset weak margins in China. We expect reopening of on-trade channels in China to drive midteens organic sales growth in 2023, similar to recovery in South Korea last year. Momentum in China is set to drive low-teens organic revenue growth and high-teens EBITDA growth for Budweiser APAC this year. We continue to view the company’s competitive advantage in the beer industry constructively due to its digitalized channel management that could drive price/mix growth. We retain our fair value estimate at HKD 24 per share, which implies 16 times 2023 EV/EBITDA, moderately below its historical average of 19 times. We think the stock could enjoy near-term momentum as investors look for companies with higher visibility in their earnings rebound. We think pent up demand for catering services will benefit beer sales in the first half.