Bud APAC saw 6.9% YoY decrease in normalised EBITDA on 8.4% YoY decrease in revenue in 3Q25 in local dollar terms. In China, soft industry cycle still weighed on beer sales turnover in all pricing classes. In 3Q25, Bud China sales and profit were below expectations, and continued to underperform other domestic peers, on a YoY basis. South Korea sales came in stronger than expected in 3Q25. Maintain HOLD.
Key Factors for Rating
Reported sales and net profit declined 8.1% and 19.9% YoY in 9M25. In 3Q25, in local currency terms, Bud APAC’s total beer sales fell 8.4% YoY (ASP: +0.1% YoY; volume: -8.6% YoY); normalised EBITDA declined 6.9% YoY (APAC West: -11.9% YoY; APAC East: +8.7% YoY). Quarterly GPM was roughly flat at 51.4%, as 0.5% YoY decrease in cost per hl was offset by 0.4% YoY decrease in overall ASP.
China segment continues to struggle amid soft industry cycle. In terms of RMB, YoY decrease of Bud China’s sales and normalised EBITDA enlarged to 15.1% and 17.4% in 3Q25, from 6.4% and 4.0% in 2Q25, respectively. Weaker normalised EBITDA margin was due to 1) adverse brand mix (as a result of stock management), 2) adverse channel mix (as a result of more sales volume from inhome consumption occasions, 3) increased A&P investments behind innovations, brand activations, and channel expansion (e.g. retail PoS coverage penetration). Looking ahead, management expects to leverage the brand power of its product portfolio to boost sales momentum. Corona extended its signature “Drinking with Lime” ritual from bottles to cans, by launching a new full open-lid can design in 3Q25, and Budweiser series also introduced 1L-canned Budweiser Magnum with its distinctive black-and-gold package. Harbin is poised to cater to the Gen Z legal drinking age consumers from the north to the south in China, via “sports & hiphop”- themed marketing events.
South Korea segment saw flat volume in 3Q25 vs. 3Q24, and MSD% YoY sales growth was attributable to higher ASP (i.e. +MSD% YoY) on the ongoing revenue management initiatives and improved brand mix. For India segment, its sales and normalised EBITDA maintained robust momentum in 3Q25, with DD% YoY growth in volume (value) of the Premium & Super Premium mix in 9M25.
Key Risks for Rating
Downside risks: 1) fears on market share loss in a fluid consumption environment, 2) cost inflation, 3) slower-than-expected on-premise channel recovery, and 4) unfavourable shift in drinking habits or preferences.
Upside risks: 1) accelerated beer premiumisation/sales turnover, e.g. in in-home channels, 2) successful new product development, and 3) price hikes.
Valuation
For 2025-27, we mainly revised down our China segment ASP and sales volume assumptions, reflecting a still relatively conservative tune on short-term industry outlook. As a result, we revised down our top-line forecasts by 3-4%, respectively. We fine-tuned our normalised EBITDA margin forecasts, considering continuous gain on cost efficiency (offset by weaker-than-expected ASP in the meantime).
It is fair to trade Bud APAC at a higher valuation multiplier, vs. other beer giants in China, given 1) stronger brand recognition and product line, esp. in the highend beer market, 2) greater business scale, with global presence, and 3) superior profitability. However, beer industry still faces some uncertainties in China, given 1) soft dine-in consumption sentiment, 2) fast growth of freshly-made beverages & healthy RTD beverages, which could be ideal substitutes, esp. for beer among younger generation in many scenarios, and 3) sluggish CPI, which may continue to weigh on ASP across most consumer staples categories. In a nutshell, we think that Bud APAC’s upside potential is limited. We thus maintain our TP at HK$8.50, equiv. to 21.0x 26E P/E. Rating is HOLD.