Although the Hang Seng Index has held up, it still relies on large-cap technology and high-dividend stocks, while the overall atmosphere is not very good, especially in the consumer category. Despite many companies announcing good results for the 618 shopping festival, there are rumors that the overall data is not very ideal.
When Maotai's price is also trending downwards, it is natural that the overall consumer sector will have a hard time outperforming, with duty-free leader China Duty Free suffering a 10-day decline. On one hand, there is consumer downgrading, and on the other hand, it is affected by the increase in outbound travelers.
Against the backdrop of consumer downgrading, beer companies that have been focusing on high-end products in recent years are undoubtedly facing challenges in the face of headwinds, finding it difficult to gain market favor. For example, both China Resources Beer and Budweiser APAC have fallen by more than 20% since May.
From the data perspective, in May, China's beer production by enterprises above designated size was 3.535 million kiloliters, a year-on-year decrease of 4.5%, with a cumulative year-on-year growth of 0.7% from January to May, showing a continuous slowdown in growth.
Although this may be influenced by the weather, with the upcoming peak season and some major sporting events, the demand for the whole year is expected to remain stable. However, the overall situation is still not very ideal, at least there is a certain gap compared to the estimates made by many consumer goods companies at the beginning of the year.
For example, China Resources Beer previously expected total sales volume to remain stable for the whole year, with average price growth in the low to mid-single digits, and sales growth for mid-to-high-end products to be in double digits. However, the company's sales volume from January to May has decreased by a low single-digit percentage. Although the company expects a better performance in the second half of the year, there is still a risk of downward guidance. The recent decline in the consumer sector is largely due to fears of downward guidance.
Assuming that China Resources Beer's revenue this year does not increase profitability and remains flat compared to last year, the P/E ratio will be 16 times, according to market forecasts it will be 14 times, and the valuation is basically hitting historical lows. However, beer does not have significant inventory risks like liquor, and demand is relatively resilient.
However, China Resources' problem lies in its acquisition of Jinsha Liquor for 12.3 billion yuan. The company expected a 40% performance growth this year, but it may not be achieved under current circumstances. Although the contribution is not significant, it is enough to be a burden

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Weak consumer spending, especially in consumer categories. Downgrading of consumption and an increase in outbound tourists have dragged down the performance of duty-free leader CTG DUTY-FREE. Both China Resources Beer and Bud APAC, two beer stocks, have fallen by over 20% since May. In May, the output of beer by large-scale enterprises in China dropped by 4.5% year-on-year, with growth continuing to slow down. China Resources Beer expects a low single-digit decline in sales volume for the whole year, with the risk of guidance downgrade. The performance of Jinsha Winery, acquired by China Resources for 12.3 billion yuan, may not meet expectations this year

Hong Kong Stock Market Review: Weak Consumer Spending