In local currency terms, Bud APAC saw 6.3% YoY decline in normalised EBITDA on 7.0% YoY decline in revenue in 2024. For 4Q24, beer market in China was still impacted by weak consumption sentiment and slower on-premise traffic, while solid growth trajectory stayed intact in South Korea and India. We think there is some more room for rerating of Bud APAC, given 1) near-term recovery in sales turnover & shipment levels, 2) optimism toward new initiatives post CEO replacement, and 3) higher dividend yield. New TP of HK$10.50 is based on 20.0x 25E P/E.
　　Key Factors for Rating
　　Sales and net profit missed. In 2024, Bud APAC’s revenue and shareholders’ profit declined 8.9% and 14.8% YoY to US$6,246m and US$726m, respectively, 3% and 12% lower than BOCIe. In local currency terms, during 4Q24, revenue shrank 11.0% YoY (ASP: +1.9% YoY; volume: -12.7% YoY); normalised EBITDA shrank 7.2% YoY (APAC East: +17.0% YoY; APAC West: -20.4% YoY). Quarterly GPM fell 2.1ppts YoY to 45.6%, mainly on sales deleveraging. Gross profit per hl was down 3% YoY in 4Q24 but remained flat at US$37.2 on a full-year basis.
　　Guidance. In general, management looks for a balance between market share growth & profitability. From a long-term perspective, beer premiumisation trend will not retreat, fuelled by 1) brand marketing & product innovation, 2) ongoing penetration, in alignment with a larger base of middle-income households. For margin expansion, besides mix upgrade, management will continue to focus on 1) pricing strategy and 2) operational efficiency, e.g. digitalisation, etc. For 2025, management expects raw & packaging material cost to be flat or slightly higher on a YoY basis.
　　Increased dividend payout ratio. Bud APAC recommended to raise DPS from US$5.29 cents in 2023 to US$5.66 cents in 2024, despite a 15% YoY decline in EPS. Dividend payout ratio for 2024 reached 103%, vs. 42%/55%/82% for 2021- 23. Looking ahead, we believe that Bud APAC may have sufficient FCF and cash balance to address a 100% payout ratio for 2025-27. The implied 25E dividend yield now equals to 6.0%, based on our estimation.
　　Senior leadership changes. On 26 Feb. 2025, Bud APAC announced that Mr.
　　Yanjun Cheng will succeed Jan Craps as CEO and Co-Chair effective from 1 Apr. 2025. Mr. Cheng joined Bud APAC as the Chief Brew-master (Production) in 1996 and was appointed as the CEO of Harbin Group in 2005. From 2009 to 2024, Mr.
　　Cheng was the VP of Supply and Logistics for Bud APAC, covering China, India, South Korea, and Southeast Asia. Jan Craps will then depart Bud APAC and AB InBev. A new leader for Mr. Cheng’s current global supply role is expected to be announced soon. In our view, now investors may heighten expectations on new initiatives post CEO replacement, esp. with regard to the China market strategy, as well as the Group’s organisational structure.
　　Bud China struggled in 4Q24. Beer sales turnover further weakened in 4Q24 in mainland China, attributable to slower traffic & spending in on-premise areas.
　　Compared to its competitors, Bud China suffered the most as its footprint within restaurants, bars and nightlife venues is far more pronounced. In terms of RMB, Bud China’s revenue and normalised EBITDA both dropped 20% YoY in 4Q24, missing expectations. In 2025, market share growth should be Bud China’s first priority, according to management. Product wise, Bud China has built up clear portfolio choices, and will enhance 1) positioning and 2) delivery of innovative products, by expanding A&P investments. Channel wise, the distribution of its Budweiser may further increase to 250 cities in 2025, vs. 220/235 cities in 2023- 24, while the distribution of its Super Premium matrix covered 56 cities by 2024.
　　Also, management reaffirms the commitment to grab in-home channel growth opportunities - 1) there is an enormous room for Bud China to expand retail PoS coverage; 2) practice from cooperation with Swire Coca-Cola Beverages in Anhui and Hubei is just replicable; 3) O2O sales growth momentum may persist as its partnerships with platforms such as Meituan and ele.me are promising. On the digitalisation front, Bud China’s BEES has been expanded to 320 cities by Dec. 2024 (Sep. 2024: 306 cities), representing c.80% of monthly sales in Dec. 2024 (Sep. 2024: c.70%).
　　South Korea segment saw HSD% YoY growth in sales volume in 4Q24 (3Q24: MSD% YoY), with stronger market presence in on-premise & in-home channels.
　　In 2024, its revenue grew at DD% YoY (supported by HSD% YoY ASP growth).
　　Total market share was up by 349bps (a historical high), in particular led by the growth of Cass due to successful brand communication and product innovations.
　　Going forward, management keeps optimistic about APAC East sales momentum and profitability. In 2025, pricing will continue to be an important driver (e.g. 8% price hike on premium products effective 1 Nov. 2024).
　　P&SP sales in India segment again experienced strong YoY growth (i.e. almost 20% YoY in both 4Q24 and 2024). Given a still low per capita consumption level, we expect Bud India to replicate success from other emerging markets, leveraging its dominance in P&SP classes. Over the past five years, the market share of its Budweiser has more than doubled, with India cementing itself as one of the top-4 markets globally for the Group.
　　Key Risks for Rating
　　Risks: 1) weaker-than-expected recovery of consumer confidence in China, esp. in on-premise channels; 2) adverse weather conditions; 3) cost inflation; and 4) forex rate fluctuations.
　　Valuation
　　We fine-tuned our revenue and profitability forecasts for 2025-26E. EPS is likely to grow at 12.6% CAGR from 2024 to 2027. To be more specific, GPM forecasts for 2025-26E are unchanged. Operating expenses ratio and effective tax rate are assumed to be a bit higher than previously expected. NPM is likely to improve by 1.8/0.8 ppt for 2025-26E.
　　In our view, it is now reasonable to trade Bud APAC at a higher valuation multiplier.
　　Catalysts include: 1) Bud China sales trend has experienced marginal recovery in 1Q25 (esp. compared with 4Q24), while APAC East growth outlook remains intact; 2) an expected reinvention or new pivots post its CEO change; and 3) increasing dividend growth. We derive our new TP at HK$10.50, based upon 20.0x 25E P/E, (previous: 17.0x 25E P/E), with a BUY rating.