AB InBev : It is always darkest before dawn

ABI’s short term earnings momentum is significantly impacted by the global outbreak of the COVID-19 virus, with lockdown measures in many countries having a big impact, mainly on the on-trade side of the business. We forecast an overall drop of volumes of 9.3% in 2020 and a 15% organic EBITDA drop, with 2Q taking the biggest quarterly hit. We do expect business could quickly recover once the COVID-19 virus is contained and lockdown measures are loosened. Valuation on our normalized 2021 forecasts is appealing, with a P/E21e multiple of 13.0x and a FCF yield21e of 8.7%, which is well below historical averages and peers like Heineken. We expect the share to be volatile in the short run, but see significant upside when governments announce relaxation of lockdown measures and the on-trade opens up again. We admit that visibility on that timing is difficult, but nevertheless stick to our BUY rating and € 80 target price. It is always darkest before dawn.