ANHEUSER - BUSCH INBEV SA Initiation of Coverage - Leading the beer industry
We initiate coverage on Anheuser-Busch InBev SA/NV (AB InBev) with a target price of ZAR1,119.12/share, which yields a 7% upside to current market valuation and a HOLD rating on the stock. We arrived at this valuation using the Discounted Cash Flow methodology for forecasted free cash flow. We understand that the global premiumization trend and market positioning places the company in a favourable growth position. Accordingly, the company's intensified efforts to expand its digital platform should provide scale and support this growth"The Beyond beer segment is key to growth
The Beyond Beer category appears to be the focus of many industry players as the future of beer and is fast gaining momentum, driven especially by premiumization. Despite intense competition from smaller players, AB InBev has been quick to adapt to this consumer pattern, pushing its existing products that fall in this category, while acquiring unique brands and introducing new products along this line. With this strategy, the company’s prospects look strong in this category. Already, Revenue from the category has grown by 20% y/y, contributing c.3% to overall Revenue."
"Premiumization wave also supports this growth
Given the outlook for growth in the global beer market, the company’s global market leadership, specifically across key emerging markets where the strongest growth is expected, is a driving factor for our positive outlook. The company’s acquisition of SABMiller has paved a path for this. Moreso, with a healthy share of the global premium market, the wave of premiumization that is sweeping across key regions is expected to provide a boost to volumes in the forecast period. For instance, the growth in China’s middle-class households will support premium Revenue, where the company already controls about 47% of market share. That said, its presence in the value segment will ensure that it also captures volume growth from this segment as well, especially as more consumers down-trade from mainstream brands to value brands on income pressures. As such, AB InBev’s share of the throat is expected to increase at a sustainable pace."
"Scale from ecommerce and digital platforms is expected
AB InBev’s foray into a digital ecosystem is well-timed, especially with the increasing reliance on remote consumption and consequently, e-commerce. A major advantage of this ecosystem is the shortened feedback loop that would deliver information on quickly changing consumer tastes. As such, the brewer is well positioned to innovate around new demand trends, given its size."
Anheuser-Busch Inbev is engaged in the brewing of beer. Co. manages a portfolio of well over 200 brands that includes brands such as Budweiser, Stella Artois and Beck's; multi-country brands such as Leffe and Hoegaarden; and other brands such as Bud Light, Skol, Brahma, Quilmes, Michelob, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske and Jupiler. Co. also produces and distributes soft drinks, particularly in Latin America. Co.'s operations are organized along seven business segments: North America, Mexico, Latin America North, Latin America South, Europe, Asia Pacific and Global Export & Holding Companies.
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