- SAB announced H1 2021 results, in which revenue and NPAT-MI advanced 9% YoY and 3% YoY, respectively. The bottom-line growth was driven by a rebound in beer sales from a low H1 2020 base as well as one-off financial income of VND194bn (USD8mn) from divesting a minority stake in Orient Commercial Bank (HSX: OCB). Excluding this one-off item, we estimate that NPAT-MI slid 5% YoY in H1 2021. 

- In Q2 2021 alone, revenue edged up only 1% YoY (Q1 2021: +19% YoY) while NPAT-MI dropped 14% YoY (Q1 2021: 32%), which we attribute primarily to the current severe COVID-19 outbreaks in Vietnam — especially those in SAB’s key market of the South — in addition to fierce competition. 

- We note that H1 2020 was a low base in terms of beer sales for SAB due to (1) severe initial disruptions to domestic beer consumption from the promulgation of Decree 100 on drunk driving, (2) COVID-19 outbreaks and (3) lingering adverse effects from false rumors about SAB’s ownership that started in Q3 2019.

- Beer GPM expanded by 0.7 ppt YoY to 35.0% in Q2 2021 (H1 2021: 34.1%; +1.3 ppts YoY), which we attribute mainly to favorable secured input material prices (e.g., raw materials and packaging) in addition to improvements in operational efficiency (e.g., economies of scale). 

- SG&A/beer revenue % remained elevated at 18.4% (+2.7 ppts YoY) in Q2 2021 (H1 2021: 19.0%; +3.1 ppts YoY). Advertising and promotion (A&P) expenses surged 42% YoY in Q2 2021 and 63% YoY in H1 2021, which was due to stiffening competition, in our view. 

- Given the current worse-than-expected COVID-19 outbreaks and SAB’s H1 2021 results trailing our expectations, we see potential downside risk to our current forecasts, pending a more extensive review.