Leading Regional Brewer Chongqing Brewery Sees Geographical Expansion as Its Next Growth Driver

We initiate coverage of Chongqing Brewery with a narrow moat rating and a fair value estimate of CNY 78 per share, indicating 24 times 2024 price/earnings and 15 times EV/EBITDA. The company’s competitive advantage stems from its entrenched distribution in core regions, which management has utilized well to drive product mix improvement and margin expansion. In our view, the notable share price correction year to date reflects investors’ cautious view on the premiumization outlook of the beer industry. We think Chongqing Brewery’s share price is fairly valued. However, we anticipate potential upside to business fundamentals if there is an upswing in consumer spending.