Budweiser APAC (01876): Goldman Sachs maintains Buy on Budweiser APAC despite China-led 3Q26 EBITDA pressure

Overview

This 3Q26 preview attributes Budweiser APAC's expected earnings pressure primarily to continued weakness in China, compounded by softer Korean volume and cost inflation. Goldman Sachs expects India to remain the principal revenue-growth offset, but not enough to prevent forecast reductions and a lower target price.

Core views

Goldman Sachs expects China, within AP West, to remain the main drag on 3Q26 results. It forecasts China volume to decline 16% year-on-year, compared with an estimated industry decline of 8.9% in July and 6.5% in August based on NBS data, and expects a soft September. The report attributes the anticipated underperformance to weaker industry demand, disproportionately unfavorable weather exposure, softer on-premise consumption, closures of some nightlife channels, and the company's continued destocking. It forecasts 0.5% ASP growth: better brand mix from O2O and in-home rollout of super-premium products is expected to be offset by promotions in online and O2O channels, discounts, and channel mix shifting toward in-home consumption. The report expects China EBITDA to decline 25% year-on-year in 3Q26, materially more than the top-line and gross-profit pressure. Lower volume is expected to create operating deleverage, while premium products and new packaging such as 740ml cans and 1L packs raise unit costs. Raw-material costs are described as relatively stable under the 12-month rolling hedging policy but sequentially higher than in 2Q26. Goldman Sachs also expects a higher sales-and-marketing expense ratio because of channel and product promotion, plus higher distribution expenses as direct in-home and O2O exposure rises and oil prices increase. For AP West overall, it forecasts an 11.9% organic-sales decline, comprising 12.5% volume contraction and 0.7% ASP growth, alongside a 22% normalized EBITDA decline on an organic, constant-currency basis; foreign exchange is expected to reduce sales by 3.4%. In AP East, Goldman Sachs expects 3Q26 organic sales to decline 4.5%, with volume down 3% and ASP down 1.5%, and normalized EBITDA to decline 8% year-on-year. Korean demand is expected to soften, although Budweiser APAC's volume performance is still projected to exceed an industry decline in the low- to mid-single digits. ASP faces weaker in-home channel mix and negative package mix from summer bundle promotions. Higher aluminum and diesel costs are expected to pressure margins despite disciplined selling expenses, producing a larger EBITDA decline than the sales decline. Foreign exchange is expected to reduce AP East sales by 5%. India is the offsetting growth engine in the report's regional view. Goldman Sachs expects solid top-line growth supported by industry expansion and premium and super-premium products, while stating that EBITDA is less of a focus as the company prioritizes revenue growth. The report also flags reported overdue receivables from the Indian state of Telangana. Without taking a view on the outcome, it estimates potential exposure of about US$40 million for a five-month period based on reported assumptions, including Telangana accounting for a mid-teens percentage of beer consumption. It warns that a large provision could create downside risk because consensus information is limited. At the group level, the institution expects China volume weakness and Korea softness to be partly offset by India at the revenue level; Korea's country mix could modestly help ASP, but negative channel, package and unit-cost mix effects remain. It forecasts a 1.0% organic revenue decline and an 18.1% organic EBITDA decline in 3Q26, with reported net profit of US$101 million and recurring net profit of US$142 million, down 31% year-on-year. The lower outlook leads Goldman Sachs to reduce 2026-28E normalized EBITDA by about 2.0%-2.4% and recurring net profit by 7%-12%. Goldman Sachs lowers its 12-month target price to HK$6.90 from HK$7.30 but maintains Buy and cites 13% upside to the revised target. On updated estimates, it states that the shares trade at 18x and 16x recurring P/E for 2026E and 2027E, respectively, and at 5.6x and 5.1x EV/EBITDA, with forecast dividend yields of 5.0% and 5.6%. The target price methodology is unchanged: it combines a 15% weighting for a 13x 2028E EV/EBITDA M&A value, discounted to mid-2027E, and an 85% weighting for a 16x exit P/E valuation based on global beer peers' full-cycle average, also discounted to mid-2027E.

Analysis framework

The report starts with country-level volume, pricing, channel-mix and cost assumptions for China, Korea and India, then translates those assumptions into regional sales and EBITDA forecasts. It aggregates the regional effects into group earnings revisions and applies a blended M&A-value and peer-multiple valuation framework to set the revised target price.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Volume and average selling price analysis

  Goldman Sachs separates sales expectations into volume and ASP changes by region, then explains how channel mix, promotions, premiumization and demand affect each component.

• Valuation methodsEV/EBITDA valuation

  Blended EV/EBITDA M&A valuation

  The target price assigns 15% weight to a 13x 2028E EV/EBITDA multiple based on recent global beer-sector acquisitions, discounted to mid-2027E.

• Valuation methodsP/E and PEG Valuation

  Exit P/E valuation

  The target price assigns 85% weight to a 16x exit P/E based on global beer peers' full-cycle average over the last two years, discounted to mid-2027E.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Budweiser APAC (1876.HK)

  Primary covered company; China weakness and Korea margin pressure are partly offset by India growth.

  Strengths

  Continued premium and super-premium growth in India; expected Korean volume outperformance versus the industry; premium-brand mix support in China.

  Weaknesses

  Severe China volume pressure, continued destocking, promotional intensity, operating deleverage and Korean input-cost headwinds.

  Comparison

  China volume is expected to underperform the industry; Korean volume is expected to outperform a weak industry backdrop.

  Risks

  Weaker-than-expected premium-channel recovery, more intense China competition, cost inflation and potential Telangana receivables provisions.

Key data

• China 3Q26 volume growth-16% YoYGoldman Sachs estimate; versus industry volume declines of 8.9% in July and 6.5% in August.
• China 3Q26 ASP growth+0.5% YoYPremium brand mix is expected to offset heavier promotion and adverse channel mix.
• China 3Q26 EBITDA growth-25% YoYReflects operating deleverage, promotion, distribution costs and higher unit costs.
• Group 3Q26 organic revenue growth-1.0%China and Korea weakness is expected to be partly offset by India.
• Group 3Q26 organic EBITDA growth-18.1%Margin pressure is expected to exceed top-line pressure.
• 2026-28E recurring net-profit revision-7% to -12%Forecasts are reduced following weaker China volume, Korean softness, higher costs and foreign-exchange changes.
• Revised 12-month target priceHK$6.90Reduced from HK$7.30; methodology unchanged.

Impact & implications

The report sees regional diversification as cushioning revenue but not fully protecting earnings, because China operating deleverage and Korean cost pressure weigh disproportionately on group EBITDA. Goldman Sachs retains its positive rating because it sees upside to the revised target price and cites the shares' updated earnings multiples and dividend yields.

Risks

• Premium-channel recovery could be weaker than Goldman Sachs expects.
• China competition could intensify.
• Cost inflation could further pressure margins.
• Overdue receivables in Telangana could require large provisions if the reported situation develops adversely.

What to watch

• Budweiser APAC's 3Q26 results, scheduled for October 29.
• China demand, weather effects, destocking progress and recovery in premium channels.
• The scale of promotions and channel mix in online, O2O and in-home consumption.
• Korean volumes, ASP mix, aluminum costs and diesel-driven transportation costs.
• India premium-product growth and developments regarding Telangana receivables.