EUR 114.00 For Business Accounts Only

SAB - The Giant of Vietnam’s Beer Industry

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“As Vietnam’s largest brewing company, SABECO has various striking advantages among its peers including its well-known brand name and its largest nationwide distribution and production networks. However, the company has seen a slowdown in growth in recent years compared with other competitors, especially with Heineken. However, as many competitors have penetrated into the high-end segment, SABECO’s ability to maintain a high and stable market share in the mid-end segment in the past four years could be considered as an achievement. Hence, we expect that the company’s growth momentum will sustain in coming years, as it continues to perform strongly in the mid and low-end segments while gradually penetrating into the high-end segment.

The problem of dependency on imported raw materials leads to the company being vulnerable to an increase in the price of hops and malt. Moreover, the change in the special tax consumption policy, in some cases, will also affect the company’s potential to increase its sales volume. If SABECO makes a provision for 2007-2012 excise tax in H2 2016, from 2016 onwards, the excise tax provision will not be as strong of a negative effect on SABECO’s earnings as compared to the previous years. At the same time, we believe that an increasing special excise tax rate from now to 2018 would only have a minor impact due to the company’s ability to pass on the excise tax increase to its clients.

Based on the assumption that SABECO’s beer consumption volume will increase by 6%, we expect that revenue and NPAT will reach VND32,689 billion (+8.6% YoY) and 4,795 billion (+5% YoY), respectively. This translates to 2017 EPS of VND7,028. Using a combination of both P/E and EV/EBITDA methods, the target price for this stock is VND143,000/share, 8.3% higher than the today’s closing price. Therefore, we rate this stock for NEUTRAL in the LONG-TERM horizon.”