06-06-2018

All the World Cup related sectors are gaining significant momentum with the Russia World Cup approaching. Amid all the World Cup related sectors, beer industry appears to be a more mature and seasonal industry. Studying the past 20 years statistics, we can clearly see that beer industries’ peak season is from May till September while World Cup tends to give breweries a huge boost in sales. Moreover, most matches in the Russia World Cup this year will be broadcasted during prime time. Comparing with the South Korea & Japan World Cup, which matches mostly took place during day time, and the Germany, South Africa & Brazil World Cup, which matches generally kicked off in the small hours of the morning, the broadcasting time of this year’s Russia World Cup can reach a lot more audience and potentially raise the consumption of beer. Furthermore, China’s breweries have raised beer prices of about 5% in tandem during the first quarter of 2018, let alone the recent cut of VAT tax rate for manufacturing sector in China, the revenue of Chinese breweries are expected to increase significantly, especially when they are known to be having a low profit margin. China Resources Beer (0291) saw significant growth in net profit last year. Its total sales volume ranked number 1 in the China market since 2006. The flagship brand “Snow” has become the largest beer brand by volume worldwide since 2008, with 26% market share. CRB’s parent CR Group has entered into a strategic alliance agreement with Tencent (700). The strategic collaboration of Tencent and CR Group will empower CRB with more innovative digital marketing, better access to e-commerce channels, stronger brand awareness and more efficient supply chain management in order to stay ahead in the competitive market. The company is also targeting middle-upper segment with a view to adapting the evolving beer market structure, which is anticipated to generate more revenue. We recommend investors accumulating in the dip.

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