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1、 China: Food resume Tsingtao; CRE down to Neutral Mature volumes, intensifying competition in a still-fragmented market Our deep-dive analysis leaves us cautious about Chinas beer sector, with mature volume growth and intensifying competition as two key structural challenges. Consequently, Chinese b
2、rewers margins are among the thinnest in the world, and we see little room for a turnaround in the near term as Tsingtaos re-focus on market share is spurring more intense price competition. Over the medium term, we see consolidation and premiumization as the two key drivers of growth. Tsingtao s re
3、turn to mkt share adds pressure China Resources Enterprises Beer business (CRSB) and Tsingtao, the top two firms in the industry, have pursued much different paths with CRSBs appetite for market share diluting margins. However, Tsingtao is now also thirsty for volumes thanks to its new management. W
4、e expect this to pressure both firms as Tsingtaos share gains will cost its margin expansion, while CRSBs lower volume growth will likely be cushioned by positive operating leverage from its wider footprint. Resume Tsingtao (H/A) as Neutral/Buy We expect Tsingtao to post a 2012-14E EPS CAGR of 12%,
5、the lowest in our staples coverage. We see weak margins as competition limits ASP. We value Tsingtao (H)/(A) on 15X 2013E EV/EBITDA, consistent with historical average. While we rate Tsingtao (H) Neutral on just 10% upside to our 12-m TP of HK$49.20, we rate Tsingtao (A) Buy as our TP of Rmb39.40 im
6、plies 17% upside. We see a valuation catch-up opportunity for Tsingtao (A). CRE down to Neutral on weak beer outlook We cut 2012-14E core EPS 8-10% for CRE, mainly on a more bearish outlook for beer as we expect direct price competition to continue into 1H13. As a result, we cut our 12-m SOTP-based
7、TP from HK$30.00 to HK$28.50, implying 9% upside. Despite more upside potential for Tsingtao (H), we prefer CRSBs long-term prospects. Key sector risks Upside/downside: less/more intense competition; better/worse than expected raw material inflation. Food safety incidents. RATINGS, TARGET PRICES, GS
8、E EPS VS. CONSENSUS CHINA BEER SECTOR ENTERING MATURE PHASE Source: Bloomberg, Datastream, Goldman Sachs Research. Prices as of February 6, 2013. Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have
9、a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to Analysts employed by non-US aff
10、iliates are not registered/qualified as research analysts with FINRA in the U.S. CompanyTickerRatingsCrncyNew TPOld TPImplied +/ % CRE0291.HKNeutralHKD28.50 30.00 9% Tsingtao (H)0168.HKNeutralHKD49.20 N/A10% Tsingtao (A)600600.SSBuyCNY39.40 N/A17%CompanyTickerF12EF13EF14E CRE0291.HK1%0%4% Tsingtao (
11、H)0168.HK3%11%10% Tsingtao (A)600600.SS2%7%8%GS vs Consensus0102030405060199219931994199519961997199819992000200120022003200420052006200720082009201020112012Cumulative China Beer Industry Production Volumes (mn tons)11yr CAGR:8.6%4yr CAGR:11.6%5yr CAGR:5.1%China: Food Downgrade CRE to Neutral from B
12、uy 4 Lesson 1: Fragmented market, inferior mix hurting profitability 5 Lesson 2: Consolidation and premiumization 2 key growth drivers 13 Lesson 3: Expansion comes at a cost 18 Prefer CRSB over Tsingtao as CR Snow s margins come of age 22 Valuation: Premium EV/EBITDA to international peers on higher
13、 growth and CROCI 28 Tsingtao (A) (600600.SS, Buy): Valuation arbitrage opportunity 31 Tsingtao (H) (168.HK, Neutral): Growth held captive by market share chase 33 CRE (0291.HK, Neutral): Down to Neutral on escalating beer wars 35 Disclosure Appendix 39 China: Food NC= Not Covered; CS=Coverage Suspe
14、nded; Estimates for CS and NC stocks are from Bloomberg. Source: Bloomberg, Goldman Sachs Research estimates. BBG TickerNameMkt Cap LastGSTarget ListReportEPSPEPEPEGEV/EBITDAEV/EBITDAP/BDiv YieldDiv YieldROEROE CloseRatingPriceCrncyCrncy1M3M6M2Yr CAGRCY12CY13CY12CY13CY12CY12CY13CY12CY13 US$mL.C. L.C.L.C.L.C.%(X)(X)2Yr CAGR(X)(X)(X)% China Brewers 168 HKTsingtao H7,579 44.30 Neutral49.20 HKDCNY(4.1) 5.6 1.9 12.7 27.8 25.6 2.2 15.5 13.4 3.8 0.7 0.8 13.8 13.1 600600 CHTsingtao A7,579 32.82 Buy39.40 CNYCNY1.7 6.5 (0.9) 12.1 25.3 23.6 2.1 14.4 12.5 3.5 0.8 0.9
