"Big Banks" Bank of America Securities: The uncertainty of the goodwill impairment of CHINA RES BEER is eliminated, target price 35.6 yuan

Bank of America Securities published a research report stating that concerns over potential goodwill impairment have been a significant source of uncertainty during the current downturn in the liquor industry over the past six months. The bank views China Resources Beer (00291.HK) issuing a profit warning as an event that alleviates these concerns. This impairment accounts for approximately 40% of the RMB 7 billion goodwill related to the company, which is larger than expected. Whether China Resources Beer will further recognize impairment in 2026 depends on the fundamentals of the liquor market. At least for now, the bank believes this amount has been included in conservative assumptions.

China Resources Beer's core beer business remains healthy, with expectations that this segment's revenue and attributable net profit will grow in low single digits year-on-year and exceed 10% in 2025. Channel checks indicate that among the three major beer companies in China, China Resources Beer may be the only one to record positive sales growth from the beginning of 2026 to date. The bank expects that the non-cash impairment will not affect dividends, and the dividend payout ratio in 2025 will be higher than in 2024 (52%).

Based on three key reasons, Bank of America Securities maintains a "Buy" rating on China Resources Beer with a target price of HKD 35.6: 1) China Resources Beer's market share continues to expand as it actively responds to channel fragmentation and diversified demand; 2) The stock has been a notable laggard in the Chinese consumer goods sector over the past six months, and with short-term uncertainties resolved, the stock price is expected to catch up; 3) Three catalysts are seen that could drive potential valuation reassessment in the second quarter, including a possible recovery in the dining channel, the second quarter being a peak season, and the World Cup in June. The bank plans to review its earnings forecast after the final results are announced