Chongqing Brewery: Muted Preliminary Earnings Growth; Retaining Fair Value Estimate of CNY 78

Narrow-moat Chongqing Brewery delivered disappointing preliminary 2023 results, with revenue and net profit below our estimates. However, we retain our CNY 78 fair value estimate, which implies 25 times 2024 price/earnings, as our longer-term forecasts remain largely unchanged. While we think investors may be deterred by the short-term macroeconomic headwinds and the pressure from consumers trading down, we see shares as undervalued, and the current price presents a good buying opportunity. We believe Chongqing Brewery will remain a quality name in the China beer sector over the long term, underpinned by both its geographical reach and brand mix.