Budweiser APAC: China Sales Turning Point Approaching, Buy at HK$8.8

Overview

This is Goldman Sachs' commentary on Budweiser APAC's Q1 2026 earnings report and the subsequent NDR (non-deal roadshow). The company's Q1 revenue was in line with expectations, and EBITDA exceeded market concerns; more importantly, group-level sales turned positive. Management outlined three top priorities for 2026: restart group sales growth, stabilize China sales, and create value through efficiency improvements. Based on this, Goldman Sachs slightly raised its 2026–2028 revenue and net profit forecasts, increasing the target price from HK$8.5 to HK$8.8 while maintaining a 'Buy' rating.

Core views

Demand side: Early signs of recovery in China In Q1 2026, ultra-premium sales have resumed double-digit growth (accounting for single-digit percentages of total sales), Budweiser brand decline has narrowed, and nightclub channel share is recovering; however, core–core++ segments still need time to recover. Supply side: Increased investment in O2O and at-home channels The company is ramping up its O2O and at-home channel initiatives, which are expected to lead to a slight short-term increase in promotional intensity, partially offsetting ASP pressures; dining-out channels remain under pressure and will take longer to recover. Regional breakdown: - China: Organic sales are expected to grow by 2.5% in 2026 (volume +2.0%, ASP +0.4%), with an EBITDA margin of 33.8% (down slightly year-on-year due to higher marketing expenses). - India: Accounts for about 10% of AP West sales; penetration is improving, and potential favorable liquor tax policies could support continued strong growth. - South Korea: Despite industry weakness, the company continues to gain share through premiumization and new products, with organic EBITDA growth in AP East expected to be around 2.1% in 2026. Profitability and valuation: Goldman Sachs has raised its 2026–2028 revenue forecasts by about 2%, mainly due to updated FX assumptions (RMB appreciation of 5% against the USD); net profit estimates have been increased by 3–4% thanks to better-than-expected operational efficiency. The stock currently trades at 19.9x/17.8x P/E for 2026/2027 and 7.1x/6.6x EV/EBITDA, below the global peer average of 9x/8x.

Analysis framework

The report follows a main thread of 'sales recovery pace—channel structure—profitability elasticity': 1. First, it assesses China's demand inflection point based on Q1 2026 sales data and management guidance; 2. Then, it breaks down the different impacts of O2O/at-home/dining-out channels on ASP and costs; 3. Finally, incorporating FX, cost, and tax assumptions, it uses dual anchors—EV/EBITDA and P/E—to arrive at the target price. Methodologically, the report conducts scenario sensitivity analyses on sales, ASP, and EBITDA margins, and continuously tracks channel inventory, promotional intensity, and sports-event catalysts.

Methodology notes

• Industry/Industrial Analysis FrameworkVolume-Price Breakdown

  Volume-Price Breakdown

  Breaking down revenue changes into two dimensions—'sales volume × ASP'—and separately tracking the impact of channels, regions, and product mix on volume and price to assess profitability elasticity.

• Valuation MethodEV/EBITDA valuation

  EV/EBITDA Valuation

  Benchmarking against global beer leaders using enterprise value multiples, adjusting for growth differences to determine valuation premiums or discounts, supplemented by cross-validation with P/E and dividend yield.

Asset mapping & comparison

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

• Budweiser APAC (1876.HK)

  Core holding, benefiting from China sales recovery, Indian penetration gains, and Korean premiumization

  Strengths

  Ultra-premium product portfolio, channel penetration, robust cash flow, 90% dividend commitment

  Weaknesses

  Slow recovery of China's dining-out channels, rising short-term promotional costs, exchange rate volatility

  Comparison

  Valuation below global peers, greater profitability elasticity

  Risks

  China consumption recovery falls short of expectations, weather factors, raw material price fluctuations, exchange rate risk

Key data

• 2026E China Sales Growth Rate+2.0%Returns to positive year-on-year growth
• 2026E China EBITDA Margin33.8%Down slightly year-on-year due to increased marketing spending
• 2026E Group Organic Sales Growth Rate+4.0%Volume up 3%, ASP up 1.1%
• 2026E Dividend Yield4.7%Calculated based on a 90% payout ratio
• Target Price Corresponding 2026E P/E Ratio19.9xBelow the global peer average of roughly 9x EV/EBITDA

Impact & implications

The report concludes that Budweiser APAC has passed its worst phase, and China sales are expected to improve quarter by quarter, driven by both a low base and premiumization. While investments in O2O and at-home channels may depress margins in the short term, they should deliver more sustainable sales and market share. The valuation remains below that of global peers, leaving room for reversion.

Risks

• China dining-out channels recover more slowly than expected
• Weather conditions in Q2 2026 and the high base ahead of the World Cup weigh on sales
• Raw material prices rise beyond expectations
• Fluctuations in the RMB or KRW exchange rates

What to watch

• The pace of recovery in China's ultra-premium and core++ segments
• Promotional intensity and ASP trends in O2O and at-home channels
• Developments in India's liquor tax policy
• The impact of brand investments amid second-half 2026 sporting events