Heading into 2H25, CRB is expected to speed up growth, lapping easier base comps. Its baijiu business is faced with industry headwinds, while beer sales recovery seems encouraging. Steady beer pricing, input cost saving and operational efficiency optimisation combine to drive margin expansion. CRB looks forward to stepping up shareholder returns, and its valuation (i.e. <15x 25E P/E) is not excessive, given stabilised growth outlook and solid execution. Also, positions do not seem crowded at this stage.
　　Key Factors for Rating
　　Positive YoY growth in beer sales volume in 1H25. We estimate that CRB should see LSD%-to-MSD% YoY growth in revenue from its beer segment as a result of steady ASP and LSD% YoY volume growth in 1H25. Relatively speaking, in 2Q25, favourable weather conditions stimulate overall beer consumption in on-premise & at-home channels in China. For CRB, Heineken is seeing stronger growth momentum esp. in Guangdong & other key regions. Volume contribution from sub-premium and above segment should exceed 25% in 1H25, reflecting a sustainable mix upgrade trend (despite still soft industry cycle). Remarkably, CRB’s cooperation with new retail channels (e.g. Sam’s Club membership stores, Pangdonglai, Freshhema) is promising and may continue to speed up profitable growth.
　　Baijiu segment negatively impacted by policy tightening. We estimate that CRB’s baijiu sales should decline YoY in 1H25, with deteriorating segmental profitability. According to the new version of the Regulations on Practicing Thrift and Opposing Waste in Party and Government Organs issued in May 2025, the working meals during official receptions must not include luxury dishes, alcohol, or cigarettes. In our view, such policy tightening hinders baijiu consumption in China, and the impact is profound and may last longer than expected.
　　FY25 outlook. CRB looks for DD% YoY growth in net profit in FY25, which we think will be achievable. We forecast unit COGS of its beer segment to fall 2.5% YoY in 2025, mainly due to lower raw material procurement prices. Overall GPM is likely to expand 1.4ppts YoY in 2025. In the meantime, efficiency improvement remains intact, with lowering operating expenses ratio. Along with scaling down capex, CRB is likely to lift dividend payout ratio to 60%/65%/70% in 2025-27.
　　Key Risks for Rating
　　Risks: 1) weaker-than-expected overall consumer sentiment, 2) fiercer industry competition, esp. for the mid-to-high-end class, and 3) input cost inflation.
　　Valuation
　　Maintain BUY rating. We revised our top-line and bottom-line forecasts for 2025- 27, primarily taking into consideration 1) a drag from its baijiu segment and 2) a reduction of SG&A expenses ratio. TP is unchanged at HK$31.10, implying 17.7x 25E P/E.