Equity Research

股
票
研 [Table_Title] Barney Wu 吴宇扬
究
Company Report: China Resources Beer (00291 HK)
(86755) 2397 6680
公司报告： 华润啤酒 (00291 HK) wuyuyang@gtjas.com

20 August 2018
[Table_Summary]
Premiumization has Strong Potential, Upgrade to "Accumulate"
高端化充满希望，上调至“收集”
 CRB reported high quality earnings growth in 1H18. CRB’s 1H18 revenue
[Table_Rank]
Rating: Accumulate
increased 11.4% YoY to RMB17,565 million, mainly driven by strong ASP hike,
Company Report

公 Upgraded
which rose 13.0% YoY. The rise in ASP was attributed to product mix
司 optimization and adjusted product prices, which also drove CRB’s gross margin
评级： 收集 (上调)
up 2.5 ppts YoY to 36.0%. Due to CRB’s improvement in sales model, its selling
报
expenses declined greatly. Stripping out the one-off provision of its staff cost
告 and impairment loss, adjusted EBIT increased 46.5% YoY. In 1H18, the [Table_Price]
6-18m TP目标价: HK$37.50
Company’s shareholders’ profit was up 28.9% YoY to RMB1,508 million, in line Revised from 原目标价: HK$33.51

with expectations.
Share price 股价： HK$32.550
 Two elements will drive high-end product development. The cooperation
between CRB and Heineken is highly complementary and will consolidate the
Company’s premiumization strategy. The management already has a clear and Stock performance
thorough plan about Heineken’s rollout. Also, the Company will still continue to 股价表现
complete its high-end domestic brand product pipeline. According to its [Table_QuotePic]
100.0 % of return

long-term capacity optimization strategy, there are more low-efficiency factories 80.0

to be closed. Except for northeastern provinces, most provinces delivered

60.0
satisfactory results in 1H18.
Equity Research Report

证  CRB's premiumization strategy has made solid progress. The Company still
40.0
证 券 研 究 报 告

券 has great potential to improve profitability in provinces where it has low quality 20.0

earnings. Since the Company's share price took a small step back recently, as
研 0.0
well as better earnings forecasts, we believe its current valuation is attractive.
究 Therefore, we upgrade our rating to "Accumulate" and raise TP to (20.0)
Aug-17 Nov-17 Feb-18 May-18 Aug-18
HSI China Resources Beer
报 HK$37.50, equaling to 18.0x 2018 adjusted EV/EBITDA, 15.9x 2019
adjusted EV/EBITDA and 14.6x 2020 adjusted EV/EBITDA.
告 [Table_PriceChange]
Change in Share Price 1M 3M 1Y
 2018 上半年华润啤酒录得高质量的盈利增长。华润啤酒 2018 年上半年收入同比增长 11.4%
股价变动 1 个月 3 个月 1年
至人民币 175.65 亿元，主要受到强劲的平均售价增长所驱动，其同比增长 13.0%。平均售
Abs. %
[Ta 价的增长主要归功于产品结构改善和价格调整，其也推动华润啤酒毛利率同比上涨 2.5 个百 (11.8) (8.3) 63.1
Consumer Sector-Food & Beverage

绝对变动 %
分点至 36.0%。因为华润啤酒销售模式的改进，其销售费用大幅减少。去除一次性员工费用
ble 计提和减值损失，公司调整后的息税前盈利同比增长 46.5%。2018 年上半年，公司股东净
Rel. % to HS Index
相对恒指变动 %
(8.2) 4.0 62.5

_In 利同比增长 28.9%至人民币 15.08 亿，符合预期。

Avg. share price（HK$）
平均股价（港元）
35.3 36.3 29.5
消
fo1
费  双轮驱动高端产品发展。华润啤酒和喜力的合作高度互补，其将完善公司高端化战略。管理
Source: Bloomberg, Guotai Junan International.

行 层对于喜力的推广已有清晰且详细的计划。另外公司仍将继续完善其高端国内品牌产品线。
]
业 根据公司长期的产能优化战略，将有更多低效的工厂被关闭。除了东北省份，大部分省份在
-

食 2018 年上半年取得了令人满意的业绩。
品
饮  华润啤酒的高端化战略已经取得显著进展。公司仍然有很大的潜力改善其落后省份的盈利能
料 力。因为公司的股价近期有小幅回调，再加上更高的盈利预测，我们认为其当前股价吸引。
因此我们上调投资评级至“收集”，上调目标价至 37.50 港元，相当于 18.0 倍，15.9 倍和 14.6
倍 2018 年，2019 年和 2020 年调整后 EV/EBITDA。
[Table_
Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE
Profit]
年结 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率
12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%)
[Ta
2016A 28,694 629 0.219 (13.1) 133.1 5.425 5.4 0.080 0.3 4.5
ble
China Resources Beer (00291 HK)

2017A 29,732 1,175 0.362 65.3 74.9 5.678 4.8 0.140 0.5 6.5
_In 2018F 32,444 2,121 0.654 80.7 42.8 6.182 4.5 0.262 0.9 11.0

fo2 2019F 35,258 2,492 0.768 17.4 36.4 6.749 4.1 0.307 1.1 11.9
中
2020F 38,132 3,120 0.962 25.3 29.1 7.427 3.8 0.385 1.4 13.6
]
外
Shares in issue (m) 总股数 (m) 3,244.2 Major shareholder 大股东 CRH beer Ltd. 51.7%
华 [Table_BaseData]
运
润 Market cap. (HK$ m) 市值 (HK$ m) 105,598.7 Free float (%) 自由流通比率 (%) 42.9
啤 3 month average vol. 3 个月平均成交股数 (‘000) 7,857.8 FY18 Net gearing (%) FY18 净负债/股东资金 (%) Net cash
输
酒
52 Weeks high/low (HK$) 52 周高/低 (HK$) 39.900 / 19.120 FY18 Est. NAV (HK$) FY18 每股估值（港元） 39.2

Source: the Company, Guotai Junan International.

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China Resources Beer (00291 HK)

China Resources Beer’s 1H18 Interim Results Review

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Strong ASP hike drove revenue up. In 1H18, China Resources Beer’s ("CRB" or the "Company") beer sales volume slightly
went down by 1.5% YoY to 6.2 million kilolitres, as sales volume in northeast China notably declined, caused by retreat of

20 August 2018
overall market size and intensified competition. Also, adjustments in product price in certain areas affected sales volume.
Notwithstanding, CRB’s 1H18 revenue surged 11.4% YoY to RMB17,565 million, thanks to the strong ASP hike, which rose
13.0% YoY to RMB2,827 per kl. The rise in ASP was mainly attributable to product mix optimization and adjusted product
prices. Broken down by region, the southern China region achieved fastest YoY growth of 18.2% YoY; the central China region
and eastern China region recorded revenue increase of 10.8% YoY and 8.4% YoY, respectively. Although raw material prices
and packaging prices have seen moderate growth, CRB’s gross margin was up 2.5 ppts YoY to 36.0% in 1H18, primarily
attributable to the rise in ASP.

The Company delivered high quality earnings growth. Due to CRB’s great improvement in sales model, its S&D expenses
ratio in 1H18 was down 1.5 ppts to 14.6%, mainly from the save in selling expenses. However, the Company’s G&A expenses
witnessed 43.0% YoY growth as the Company accrued a one-off provision of staff cost for 2017 in 1H18, around RMB174 million,
and impairment loss resulted from production capacity optimization. In 1H18, the impairment loss was RMB266 million, of which
RMB90 million was from PPE impairment and RMB176 million was from inventory impairment, was partly due to brewery closure
and elimination of outdated bottles. Stripping out non-cash impairment and one-off provision of staff cost, adjusted EBIT

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increased 46.5% YoY. In 1H18, the Company’s shareholders’ profit increased 28.9% YoY to RMB1,508 million, in line with
expectations.

Table-1: CRB’s 1H18 Interim Review

RMB million 1H17 1H18 YoY 2H17 1H18 HoH

China Resources Beer 华润啤酒 (00291 HK)

Total revenue 15,774 17,565 11.4% 13,958 17,565 25.8%
COGS (10,492) (11,242) 7.1% (9,211) (11,242) 22.0%
Gross profit 5,282 6,323 19.7% 4,747 6,323 33.2%
Other income 366 336 -8.2% 444 336 -24.3%
S&D expenses (2,541) (2,564) 0.9% (2,471) (2,564) 3.8%
G&A expenses (1,420) (2,031) 43.0% (2,556) (2,031) -20.5%
EBITDA 2,533 2,882 13.8% 1,024 2,882 181.4%
Adjusted EBITDA* 2,555 3,318 29.9%
EBIT 1,687 2,064 22.3% 164 2,064 1158.5%
Adjusted EBIT* 1,709 2,504 46.5%
Interest income 33 46 39.4% 60 46 -23.3%
Finance costs (101) (33) -67.3% (27) (33) 22.2%
Profit before tax 1,619 2,077 28.3% 197 2,077 954.3%
Income tax (441) (563) 27.7% (189) (563) 197.9%
Profit after tax 1,178 1,514 28.5% 8 1,514 18825.0%
Shareholders’ profit 1,170 1,508 28.9% 5 1,508 30060.0%

Sales volume (million kl) 6.3 6.2 -1.5% 5.5 6.2 12.7%
ASP (RMB/kl) 2,501 2,827 13.0% 2,532 2,827.0 11.7%
Gross Margin 33.5% 36.0% 2.5 ppts 34.0% 36.0% 2 ppts
Company Report

Operating Margin 10.7% 11.8% 1.1 ppts 1.2% 11.8% 10.6 ppts
Net Margin 7.4% 8.6% 1.2 ppts 0.0% 8.6% 8.5 ppts
Source: the Company, Guotai Junan International.
Note: Excluding impairment loss recognized in 1H17 and 1H18 and one-off provision of staff cost for 2017 in 1H18.

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China Resources Beer (00291 HK)

Figure-1: CRB’s Beer Sales Volume and YoY Growth Figure-2: CRB’s Beer ASP and YoY Growth

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mn kl RMB$/kl
6.5 6% 2,900 2,827 15%

20 August 2018
6.4 2,700
2,480 2,483 2,501 13.0% 12%
6.3 6.3 3% 2,500 2,322
6.3 6.3 2.9% 9%
6.2 2,300
6.2 2,100 6%
-0.8% 6.1 0% 6.8%
-1.5% 1,900
6.1 -2.0% 3%
1,700 0.8%
0.1%
6.0 -3% 1,500 0%
1H14 1H15 1H16 1H17 1H18 1H14 1H15 1H16 1H17 1H18
Sales Volume (LHS) YoY Growth (RHS) ASP (LHS) YoY Growth (RHS)

Source: the Company. Source: the Company.

Figure-3: CRB’s EBIT Contribution by Region Figure-4: CRB’s EBIT Margin by Region

RMB mn
19.6%

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2000 20.0%
16.6%
752
1500 15.0%
700 750 12.1% 12.2%
10.9%
524 9.7%
1000 9.2%
10.0%
227 236 6.1%
500 5.0%

China Resources Beer 华润啤酒 (00291 HK)

762 738 844

0 0.0%
1H16 1H17 1H18 Overall Eastern Central Southern
Eastern Central Southern 1H17 1H18

Source: the Company. Source: the Company.

Key Takeaways from Analyst Presentation

The cooperation with Heineken will consolidate the Company’s premiumization strategy. The cooperation between CRB
and Heineken is highly complementary. Although Heineken's market share in China is relatively low and channel layout is
relatively insufficient, it has strong brand influence around the world and strong market competitiveness in the high-end market.
On the other hand, China Resources Beer has a comprehensive channel system that allows Heineken to expeditiously
increase its coverage. In recent years, Heineken's growth trend has been steady, but its three factories in China have low
capacity utilization rates and high management expense, which has lead to a gap between its profitability in China and its
global level. CRB believes that management expenses of Heineken can be apportioned after the merger and capacity
utilization will increase steadily; profitability of Heineken is expected to reach the level of Heineken's global level. Although the
high-end products of the Company have grown rapidly over the past few years, there is still a big gap compared with foreign
brands such as Anheuser-Busch InBev. The company hopes to introduce the Heineken brand to supplement their high-end
product portfolio alongside Snow Beer, and increase its market share in the high-end beer market and narrow the gap to
Budweiser. The company will reach further agreements with Heineken on brand licensing fees, restrictions on imported
Heineken beer, and supply chain integration.
Company Report

The Company’s management already has a clear and thorough plan concerning Heineken’s rollout. According to a
statement from the Company’s management, CRB will launch Heineken products nationwide, but the Company will focus on
key markets such as eastern China and southern China, where high-end beer has higher penetration. In respects of channel
layout, the night club channel will be the primary target for the Company to make a breakthrough, as CRB has less presence in
that channel. As CRB has a strong position in the catering channel, the Company has determined to comprehensively and
rapidly launch its domestic and international brand products in the catering channel.
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China Resources Beer (00291 HK)

Two elements will drive high-end product development. After CRB finally absorbs the Heineken brand into its product
portfolio, the Company will still continue to complete its high-end domestic product pipeline. To reinforce market share in the

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price range between RMB9-RMB15, CRB plans to roll out two high-end domestic brand products next year. The Company
insists that its domestic products will be labeled as local brands with outstanding characteristics of Chinese culture. Likewise,

20 August 2018
its international brand, Heineken, will have five different series and price ranges, which will target to appeal to young customers
who favor international fashion trends.

Firmly implement capacity optimization strategy. The Company consistently sticks with its long-term strategy to optimize
capacity by phasing out idle capacity. In 1H18, CRB closed several factories despite local government encouragement to
remain, and there are more factories to be closed in 2H18 and 2019, which will include large-scale factories. When large-scale
factories are closed next year, the Company is likely to record a huge amount of impairment expense. But the benefits of
closure of factories will gradually exceed the impairment cost in two years’ time, having less impact to profit. Moreover, CRB will
highlight development of major factories in certain areas and key plants in transportation hubs. The Company plans to create
more personalized and flexible production lines that will be able to coordinate the production of bottled and canned beer.

Most provinces delivered satisfactory results. Due to weak economic growth and continuous outflow of population, as well
as intensified competition, the Company’s sales in northeast provinces saw notable retreat. Except for northeast provinces,
other provinces all reported improvement in sales and profit. Sichuan has always been the model province for CRB, as the

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Company has strong channel power there to roll out mid- and high-end products. CRB maintains strong control of southwest
provinces, which delivered high profitability. The Company recorded loss in Guangdong province in the past and still has not
reached breakeven this year, but the Company has confidence to earn profit soon. Henan province witnessed profit growth,
though sales volume was down after price hikes. As the Company has corrected its weakness and improved product mix, sales
and earnings improved significantly in Zhejiang, Anhui and Jiangsu, where the Company previously had low ASP and poor
product mix. Eastern China is a key area for CRB to implement channel reform, as eastern China has the most factories, the

China Resources Beer 华润啤酒 (00291 HK)

highest investment but the lowest profitability.

Figure-5: Monthly Beer Sales Volume and YoY Growth in Figure-6: Accumulated Beer Sales Volume and YoY
China Growth in China

Production volume (LHS) YoY Growth (RHS)

mn l mn l Production volume (LHS) YoY Growth (RHS)
6,000 8% 3.0%

6% 45,000 2.5%
5,000 2.0%
4%
35,000 1.5%
4,000 2% 1.0%
0% 25,000 0.5%
3,000
0.0%
-2%
2,000 15,000 -0.5%
-4%
-1.0%
1,000 -6% 5,000 -1.5%
Mar-17 Jun-17 Sep-17 Dec-17 May-18 Mar-17 Jun-17 Sep-17 Dec-17 May-18

Source: National Bureau of Statistics of China. Source: National Bureau of Statistics of China.
Company Report

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China Resources Beer (00291 HK)

Figure-7: Imported Beer in China - by Sales Volume Figure-8: Imported Beer in China - by Sales Value
USD mn

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mn l Total Imported Volume (LHS) YoY Growth (RHS) Total Imported Value (LHS) YoY Growth (RHS)
800 100% 800 100%
85.4%

20 August 2018
74.1% 80%
71.4% 80%
600 65.6% 600
59.4% 59.1% 60.6%
60% 50.9% 60%
400 400 41.3%
30.8% 40% 40%
26.5%
20.1% 19.6% 20.1%
200 17.5% 200 15.8% 12.7%
10.8% 20% 20%

0 0% 0 0%

Source: National Bureau of Statistics of China. Source: National Bureau of Statistics of China.

Packaging costs have started to fall and increasing price of barley has not made an impact. Although YTD cardboard
paper price grew 17.6% YoY as at August 18, 2018, due to the carryover effect, cardboard paper prices lost rising momentum
in 1H18, and started to fall month over month. Aluminum price remained stable in 1-8M2018, not seeing notable growth. On the

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other hand, barley price rebounded greatly from its lowest this year, but it has not made an impact on the Company’s input cost
due to abundant inventory. Pressure from rising barley price is likely to appear in 2H2018 and 2019, but the effect may not be
notable due to low contribution from barley to COGS compared to packaging costs. Generally, packaging price hikes have less
effect on the Company’s COGS, which will favor the improvement in its gross margin.

Figure-9: Cardboard Paper Price Figure-10: Aluminum Price

China Resources Beer 华润啤酒 (00291 HK)

RMB/ton Cardboard: Guangdong: Jiulong (126g)
RMB/tom CCMN: Average Price: Aluminum: A00
Cardboard: Jiangsu, Zhejiang: Sea Dragon (120g)
8,000 Cardboard: Jiangsu, Zhejiang: Sequoia (120g) 18,000
Cardboard: Tianjin: Sea Dragon (140g) 17,000
7,000
16,000
6,000
15,000
5,000 14,000
4,000 13,000

3,000 12,000
11,000
2,000
10,000
1,000
9,000
0 8,000
Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18

Source: Wind. Source: Wind.

Figure-11: Barley price Figure-12: Rice price

425
5.0% APPI of Rice: YoY
Imported Barley Price (USD/ton)
4.0%
375
3.0%

2.0%
325
1.0%

275
0.0%
Oct-13

Oct-14

Oct-15

Oct-16

Oct-17
Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18
Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18
Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

-1.0%

225 -2.0%
Company Report

-3.0%

175 -4.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: China Customs. Source: National Bureau of Statistics of China.

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China Resources Beer (00291 HK)

Earnings Forecasts Assumptions and Revisions

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We raise revenue forecasts due to strong ASP hike. As the Company implements their high quality growth strategy, sales
volume will be affected by higher ASP. As a result, we have revised down estimations of CRB's sales volume by 1.5% in 2018,

20 August 2018
but revised up estimations of the Company's sales volume in 2019 and 2020 by 0.3% and 2.4%, respectively, due to the
contribution from Heineken. Considering faster-than-expected product mix upgrade and ASP lift, we raise ASP forecasts by 4.0%,
4.0% and 5.4% in 2018-2020, respectively. Also, Due to ASP hikes and product mix upgrade, as well as stable input costs, we
revise up gross margin in 2018-2020 by 1.6 ppts, 1.2 ppts and 1.0 ppts, respectively.

We revise up 2018-2020 shareholders’ profit due to more savings on expenses. We saw that the Company successfully
curbed its selling expense growth due to selling strategy shift. Therefore, we have revised down its S/D expenses ratio in
2018-2020 by 1.0 ppts, 0.9 ppts and 0.7 ppts, respectively. As CRB will close more large-scale factories in 2H18 and 2019, the
Company is expected to record more impairment losses. We have revised up adjusted EBITDA, excluding impairment losses
and one-off provision of staff cost for 2017, by 9.8%, 10.0% and 7.2% in 2018-2020, respectively. As well as less depreciation
expenses due to reduced number of plants, we have revised up the Company's shareholders' profit by 10.8%, 6.0% and 13.8%
in 2018-2020, respectively.

Table-2: Key Figure Revisions for CRB

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New Old Change
RMB million
2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F

Sales volume (mn kl) 11.7 12.1 12.5 11.9 12.1 12.2 -1.5% 0.3% 2.4%

ASP (RMB/kl) 2,767 2,906 3,051 2,662 2,795 2,895 4.0% 4.0% 5.4%

China Resources Beer 华润啤酒 (00291 HK)

Revenue 32,444 35,258 38,132 31,802 33,727 35,290 2.0% 4.5% 8.1%

Gross profit 11,615 12,658 13,727 10,876 11,703 12,352 6.8% 8.2% 11.1%

EBITDA 4,726 5,095 5,715 4,337 4,894 5,381 9.0% 4.1% 6.2%

Adjusted EBITDA 5,366 5,970 6,309 4,887 5,426 5,884 9.8% 10.0% 7.2%

EBIT 3,036 3,430 4,085 2,569 3,068 3,502 18.2% 11.8% 16.7%

Net profit 2,121 2,492 3,120 1,913 2,352 2,741 10.9% 6.0% 13.8%

EPS (RMB) 0.654 0.768 0.962 0.590 0.725 0.845 10.8% 6.0% 13.8%

Gross margin 35.8% 35.9% 36.0% 34.2% 34.7% 35.0% 1.6 ppts 1.2 ppts 1 ppts

EBITDA margin 14.6% 14.5% 15.0% 13.6% 14.5% 15.2% 1 ppts 0 ppts -0.2 ppts

EBIT margin 9.3% 10.0% 11.2% 8.1% 9.3% 10.3% 1.2 ppts 0.7 ppts 0.9 ppts

Net margin 6.5% 7.1% 8.2% 6.0% 7.0% 7.8% 0.5 ppts 0.1 ppts 0.4 ppts
Source: Guotai Junan International.

Upgrade investment rating to "Accumulate" and raise TP to HK$37.50. CRB's premiumization strategy has made solid
progress. In addition, cooperation with Heineken is expected to accelerate its premiumization progress and improve CRB’s
influence in the high-end market. The Company still has great potential to improve profitability in many provinces. The Company's
capacity optimization strategy will enhance its profitability in the long term, despite that it might erode short-term profit. Since the
Company's share price took a small step back recently, as well as better earnings forecasts, we believe its current valuation is
attractive. Therefore, we upgrade our rating to "Accumulate" and raise TP to HK$37.50, equal to 20.4x 2018 EV/EBITDA, 18.6x
2019 EV/EBITDA, and 16.1x 2020 EV/EBITDA or 18.0x 2018 adjusted EV/EBITDA, 15.9x 2019 adjusted EV/EBITDA and 14.6x
2020 adjusted EV/EBITDA. Downside risks include sluggish sales in 2H18, loss of market share and problems in cooperation
Company Report

with Heineken.

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China Resources Beer (00291 HK)

Table-3: Peers Comparison

Market

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Company PER(x) EV/EBITDA PBR(x) ROE (%) D/Y (%) Cap
Stock Code Currency Last price 17A 18F 19F 20F 17A 18F 19F 20F 18F 18F 18F HKD mil

20 August 2018
HK - Listed Brewery
Tsingtao Brewery 168 HK HKD 36.900 34.2 26.4 22.5 19.1 16.1 12.3 10.6 9.3 2.4 9.2 1.7 52,869
China Resources Beer 291 HK HKD 32.550 78.3 47.5 36.8 30.2 21.6 19.0 15.6 13.3 4.7 10.8 0.8 105,598
Simple Average 56.2 36.9 29.7 24.6 18.9 15.7 13.1 11.3 3.5 10.0 1.3
Weighted Average 63.6 40.5 32.0 26.5 19.8 16.8 14.0 12.0 3.9 10.3 1.1

PRC - Listed Brewery

Tsingtao Brewery 600600 CH CNY 36.130 38.6 31.2 26.3 22.7 16.1 12.1 10.4 9.0 2.7 8.8 1.4 52,868
Beijing Yanjing Brewery 000729 CH CNY 6.070 106.5 42.7 36.1 34.3 15.1 12.8 11.3 9.8 1.3 2.8 0.8 19,526
Chongqing Brewery 600132 CH CNY 23.880 35.1 27.4 23.2 20.0 21.1 16.7 14.0 11.9 8.8 32.8 2.8 13,190
Simple Average 60.1 33.8 28.5 25.7 17.4 13.8 11.9 10.3 4.2 14.8 1.7
Weighted Average 53.6 33.2 28.1 24.9 16.6 12.9 11.1 9.6 3.3 11.1 1.5

HK - Listed Staple
Hengan Intl 1044 HK HKD 65.950 18.1 17.7 16.2 15.0 16.2 12.0 11.0 10.2 3.9 23.3 3.7 79,555

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Want Want China 151 HK HKD 6.100 20.0 20.7 19.0 17.5 12.6 11.4 11.0 10.1 4.2 21.8 0.0 75,941
Tingyi 322 HK HKD 15.280 40.8 30.7 26.0 22.8 11.1 10.6 9.3 8.4 3.7 12.8 1.7 85,840
China Mengniu Dairy 2319 HK HKD 21.600 35.6 23.7 18.5 15.2 16.0 14.0 11.6 9.7 2.9 12.8 1.0 84,833
Uni-President China 220 HK HKD 7.590 32.3 25.4 22.3 19.6 8.6 9.4 8.5 7.8 2.2 8.7 2.5 32,784
Vinda International 3331 HK HKD 13.880 26.4 20.1 17.0 14.4 12.8 10.1 8.9 7.8 1.7 9.0 1.6 16,578
China Foods 506 HK HKD 3.490 5.5 21.8 17.8 14.9 5.3 8.9 7.6 6.4 2.1 9.1 1.4 9,762

China Resources Beer 华润啤酒 (00291 HK)

Simple Average 25.5 22.9 19.6 17.1 11.8 10.9 9.7 8.6 3.0 13.9 1.7
Weighted Average 28.6 23.4 20.1 17.6 13.3 11.6 10.4 9.2 3.4 16.1 1.7

International Brewery
Anheuser-Busch Inbev ABI BB EUR 86.970 24.1 20.9 18.5 16.8 15.3 13.5 12.6 11.6 2.6 12.8 4.1 1,572,7
Diageo Plc DGE LN GBp 2,793.500 26.4 23.0 22.1 20.6 18.4 20.1 17.7 16.6 7.6 29.8 2.4 686,331
06
Heineken Nv HEIA NA EUR 86.000 25.4 21.1 19.2 17.5 12.9 11.2 10.4 9.5 3.3 16.3 1.8 443,621
Asahi Group 2502 JP JPY 4,906.000 15.9 15.0 14.2 13.4 13.3 10.7 9.9 9.2 1.9 12.6 1.9 168,684
Kirin Holdings 2503 JP JPY 2,559.000 9.6 14.6 14.5 13.6 10.4 10.7 9.8 9.0 2.4 16.4 1.9 166,299
Carlsberg CARLB DC DKK 784.000 95.0 22.8 21.1 19.2 15.9 10.3 9.7 9.0 2.4 10.7 2.2 142,886
Simple Average 32.7 19.5 18.3 16.8 14.4 12.8 11.7 10.8 3.4 16.4 2.4
Weighted Average 26.8 20.8 19.1 17.5 15.3 14.2 13.0 12.0 3.7 17.0 3.1
Source: Bloomberg, Guotai Junan International.

Figure-13: PER Band of CRB Figure-14: PBR Band of CRB

Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
50 6.0

45
5.0
40 (x) (x)
35 4.0
30
3.0
25
20 2.0
15
10 1.0
5
0.0
0 China Resources Beer
China Resources Beer
PBR (historical) PBR (current) PBR (high)
PER (historical) PER (current) PER (high)
Company Report

PER (low) PER band PBR (low) PBR band

Source: Bloomberg, Guotai Junan International Source: Bloomberg, Guotai Junan International

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China Resources Beer (00291 HK)

Financial Statements and Ratios

[Table_IncomeStatement] Income Statement [Table_BalanceSheet] Balance Sheet

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Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F

20 August 2018
Total Revenue 28,694 29,732 32,444 35,258 38,132 Fixed assets 20,900 20,449 20,144 19,709 19,350

Cost of sales (19,021) (19,703) (20,829) (22,600) (24,404) Goodwill 8,422 8,318 8,318 8,318 8,318

Gross profit 9,673 10,029 11,615 12,658 13,727 Net deferred tax asset 2,011 2,261 1,930 1,964 2,042

Others 269 237 237 237 237

Other income 652 810 755 802 851 Total Non-current Assets 31,602 31,265 30,629 30,228 29,947

Selling & distribution exp. (5,033) (5,012) (4,931) (5,289) (5,720)

General & administrative exp. (3,535) (3,976) (4,402) (4,741) (4,773) Cash & Cash Equivalents 3,487 2,361 4,825 6,898 10,011

EBITDA 3,478 3,557 4,726 5,095 5,715 Inventories 6,110 5,826 6,158 6,845 7,195

Operating Profit 1,757 1,851 3,036 3,430 4,085 Trade & other receivables 1,253 1,006 1,255 1,207 1,285

Others 178 193 169 166 172

Interest income 71 93 93 190 272 Total Current Assets 11,028 9,386 12,406 15,116 18,663

Finance costs (89) (128) (105) (89) (86)

Profit Before Tax 1,739 1,816 3,024 3,531 4,271 Total Assets 42,630 40,651 43,036 45,344 48,610

Income Tax (320) (630) (882) (1,013) (1,119)

profit After Tax 1,419 1,186 2,142 2,518 3,152 Trade & other payables 16,411 16,605 17,438 18,508 19,829

Non-controlling Interest (790) (11) (21) (25) (32) Short term loans 1,592 2,383 2,158 2,341 2,341

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Shareholders' Profit / Loss 629 1,175 2,121 2,492 3,120 Taxation payable & others 2,802 207 207 207 207

Basic EPS 0.219 0.362 0.654 0.768 0.962 Total Current Liabilities 20,805 19,195 19,803 21,056 22,377

Adjusted EBITDA 3,942 4,296 5,366 5,970 6,309 Long term loans 2,953 1,087 1,245 535 432

Adjusted EBIT 2,221 2,590 3,676 4,305 4,679 Deferred taxation liabilities 271 255 261 262 260

Other non-current liabilities 934 1,629 1,586 1,484 1,305

Total Non-current Liabilities 4,158 2,971 3,092 2,281 1,997

China Resources Beer 华润啤酒 (00291 HK)

[Table_CashFlowStatement] Cash Flow Statement Total Liabilities 24,963 22,166 22,895 23,337 24,374

Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Total Shareholders' Equity 17,601 18,421 20,055 21,896 24,094

PBT 1,739 1,816 3,024 3,531 4,271 Minority Interest 66 64 85 111 142

D&A 1,697 1,683 1,781 1,849 1,908 Total Equity 17,667 18,485 20,140 22,007 24,236

Working capital change 1,338 941 252 431 893

[Table_FinancialRatio] Financial Ratios
Others (454) (185) (126) (627) (860)

Cash from Operating Activities 4,320 4,255 4,932 5,184 6,211 2016A 2017A 2018F 2019F 2020F

Revenue growth 2.6% 3.6% 9.1% 8.7% 8.1%

Capital Expenditure (1,863) (1,915) (2,000) (2,000) (2,000) Gross margin growth -1.3% 3.6% 5.7% 8.5% 8.0%

Sales of assets 280 200 126 166 106 EBITDA growth -2.7% 2.3% 32.9% 7.8% 12.2%

Receipt of government grants 462 433 (43) (102) (179) EBIT growth -1.8% 5.4% 64.0% 13.0% 19.1%

Others (443) 119 3 4 0 Net profit growth -115.3% 86.8% 80.5% 17.5% 25.2%

Cash from Investing Activities (1,564) (1,163) (1,914) (1,932) (2,073)

Gross margin 33.7% 33.7% 35.8% 35.9% 36.0%

Issue of shares 8,149 0 0 0 0 EBIT margin 6.1% 6.2% 9.4% 9.7% 10.7%

Net bank loans 879 (3,550) (67) (527) (103) EBITDA margin 12.1% 12.0% 14.6% 14.5% 15.0%

Interest paid (106) (117) 0 0 0 Net profit margin 2.2% 4.0% 6.5% 7.1% 8.2%

Dividend paid 0 (487) (487) (651) (923)

Others (11,107) (16) 0 0 0 ROA (%) 1.5 2.9 4.9 5.5 6.4

Cash from Financing Activities (2,185) (4,170) (554) (1,178) (1,026) ROE (%) 4.5 6.5 11.0 11.9 13.6

Payout ratio (%) 41.3 38.6 40.0 40.0 40.0

Net Changes in Cash 571 (1,078) 2,464 2,073 3,113 Net gearing (%) Net cash Net cash Net cash Net cash Net cash

Cash at Beg of Year 2,802 3,487 2,361 4,825 6,898 Debt/equity (%) (41.3) (18.8) (17.0) (13.1) (11.5)

Foreign exchange effect 114 (48) 0 0 0 Current ratio (x) (0.5) (0.5) (0.6) (0.7) (0.8)

Cash at End of Year 3,487 2,361 4,825 6,898 10,011

P/E (x) 133.2 77.3 42.8 36.4 29.1

P/B (x) 5.4 4.9 4.5 4.1 3.7

Company Report

Source: the Company, Guotai Junan International. EV/EBITDA (x) 23.0 23.9 17.5 15.9 13.7

Div yield (%) 0.3 0.5 0.9 1.1 1.4

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China Resources Beer (00291 HK)

[Table_CompanyRatingDefinition]
Company Rating Definition
The Benchmark: Hong Kong Hang Seng Index

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Time Horizon: 6 to 18 months
Rating Definition

20 August 2018
Buy 买入 Relative Performance>15%;
or the fundamental outlook of the company or sector is favorable.
Accumulate 收集 Relative Performance is 5% to 15%;
or the fundamental outlook of the company or sector is favorable.
Neutral 中性 Relative Performance is -5% to 5%;
or the fundamental outlook of the company or sector is neutral.
Reduce 减持 Relative Performance is -5% to -15%;
or the fundamental outlook of the company or sector is unfavorable.
Sell 卖出 Relative Performance <-15%;
or the fundamental outlook of the company or sector is unfavorable.

[Table_IndustryRatingDefinition]
Sector Rating Definition
The Benchmark: Hong Kong Hang Seng Index
Time Horizon: 6 to 18 months
Rating Definition
Outperform 跑赢大市 Relative Performance>5%;
or the fundamental outlook of the sector is favorable.

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Neutral 中性 Relative Performance is -5% to 5%;
or the fundamental outlook of the sector is neutral.
Underperform 跑输大市 Relative Performance<-5%;
Or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS
[Table_DISCLOSUREOFINTERESTS]

China Resources Beer 华润啤酒 (00291 HK)

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report.
(2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.
(3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886 HK),GFI MSCI A I (03156
HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),MR CSI300 ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156
HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in
this Research Report.
(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research
Report within the preceding 12 months.
(5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research
Report.
(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research
Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities
(Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research
reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest
proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales
persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be
contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does
not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking
estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and
mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks,
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This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in
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Company Report

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