• We attended SAB’s AGM in HCMC on April 25, 2024.
• Management expresses confidence in achieving its 2024 targets given the Q1 2024 results. We see potential slight upside to our 2024F forecasts for SAB, pending a more comprehensive review.
• SAB released Q1 2024 results with net revenue of VND7.2tn (+16% YoY) and NPAT-MI of VND997bn (+3% YoY), which is driven by stronger beer sales volume and full effect of price hikes in early 2023 despite realizing higher input costs in Q1 2024 vs Q1 2023. The results completed 22% and 23% of our respective full-year forecasts and slightly ahead of our expectation.
• Shareholders approved 2024 guidance including net revenue of VND34.4tn (+13% YoY) and NPAT of VND4.6tn (+8% YoY). The lower growth target for earnings vs net revenue is mainly due to the realization of over-hedged high-cost raw materials and FX loss.
• The AGM approved FY2023 cash dividend of VND3,500/share (6.4% yield). SAB paid VND1,500/share in February 2024 and plans to pay the remaining amount of VND2,000/share on July 31, 2024 (record date: July 8, 2024). Shareholders also approved FY2024 cash dividend guidance of VND3,500/share (6.4% yield).

1. Q1 2024 results:

- Revenue growth: According to SAB, revenue growth was driven by stronger beer sales volume, which is mainly due to different timing of Lunar New Year in 2023 and 2024, and full effect of price hikes in early 2023. Specifically, beer sales volume for 2024 Lunar New Year was primarily recorded in January-February 2024 as Lunar New Year occurred in mid-February. Meanwhile, 2023 Lunar New Year occurred in late January, resulting in a smaller portion of beer sales volume for Lunar New Year being recorded in January 2023.

- Earnings growth: NPAT-MI increased slightly by 3% YoY as losses from associates and lower net financial income partly offset the positive effect of solid beer sales volume growth and strict control of SG&A expenses.

- Margins: Beer GPM slightly declined to 33.0% in Q1 2024 from 33.7% in Q1 2023, which is due to realization of over-hedged high-cost raw materials. Despite this, EBIT margin expanded to 14.6% in Q1 2024 from 14.0% in Q1 2023, which is driven by strict control of SG&A expenses. A&P expenses/beer revenue softened to 7.0% in Q1 2024 hitting the lowest level of the last eight quarters, which is in line with management guidance for more selective spending on A&P activities in 2024.

- Management stated that losses from associates in Q1 2024 came from:

+ Crown Beverage Cans Saigon Limited (SAB’s 30%-stake associate producing and supplying aluminium cans for SAB and other alcohol and soft drink companies) incurred losses as some of its clients stocked up cans in Q4 2023 for using in Q1 2024, leading to a drop in the number of orders in Q1 2024, coupled with forex impacts.

+ Saigon Binh Tay Beer Group JSC (SAB’s 22.18%-stake associate)

2. Other information about SAB’s operation:

- Market share: Per management, SAB gained share in 2023 as its strength in the off-trade channel partly alleviated the negative impacts of strict enforcement of drunk driving laws on SAB. SAB also stated that the share gaining momentum continued in Q1 2024 and aims to raise its company market share to the first position in Vietnam.

- E-commerce: Despite initiating ecommerce in October 2023, SAB gained good tractions in November-December 2023. Management believes that contribution from e-commerce should increase going forward as this is a promising channel riding on tech-savvy consumers in Vietnam.

- Raw materials: SAB expects to use up all over-hedged high-cost raw materials in 2024, dampening its gross margin in 2024. However, this may be partly offset by applying cost optimization and operational efficiency initiatives. In addition, SAB expects the ease of raw material prices in 2024 may support its profit margins in 2025.

3. Regulations:

- Drunk driving laws: SAB is working with Vietnam Beer-Alcohol-Beverage Association to propose the Government considering setting an appropriate blood alcoholic content (BAC) limit vs zero tolerance currently.

- Excise tax: SAB and other industry players have tried to propose for delay in revisions in excise tax rates.

SAB’s Q1 2024 results

Source: SAB, Vietcap

Powered by Froala Editor