Profit Plummets 39.8%, Triggering Price Target Cut
China Resources Beer reported a sharp decline in financial performance, with last year's sales falling 18.6% year-on-year to RMB11.002 billion. The drop in revenue contributed to a 39.8% collapse in net profit, which landed at RMB985 million, below both analyst and market expectations. In response to the weak results, CLSA lowered its target price on the company's stock to HKD10.7 from a previous HKD13.1.
Rising PET Costs Threaten Future Margins
While management guided for robust growth in its bottled water business and over 20% year-on-year growth in beverages, analysts flagged a key operational risk. CLSA highlighted that elevated prices for PET plastic, a critical raw material for bottling, pose a significant threat to the company's profit margins, especially in the second half of the year. To account for this headwind, the firm reduced its earnings forecasts for China Resources Beer for 2026 and 2027 by 19% and 22%, respectively.
4.8% Dividend Yield Offers Downside Support
Despite the negative revisions, CLSA maintained its "Outperform" rating on the stock. The decision is partly supported by the company's shareholder return policy. China Resources Beer confirmed a 90% dividend payout ratio, which translates to a dividend yield of 4.8%. CLSA suggests this substantial yield is expected to provide downside protection for the stock's valuation as it navigates cost pressures.
