In this report, we review the prospects and competitive landscape of Vietnam’s beer sector. We reiterate our BUY rating for SAB and raise our target price (TP) to VND71,000/share.

Vietnam’s beer consumption is set to recover in 2024 from 2023’s low base, face medium-term headwinds, but enjoy long-term favorable demographics. We anticipate beer consumption to recover in 2024F from a weak 2023, led by the rebounding economy despite strict enforcement of drunk driving laws and ongoing stiff competition. We expect prolonged strict enforcement of drunk driving laws to slow medium-term beer consumption growth. However, we believe a potential excise tax hike from 2026 will have minimal impact on SAB's profitability. Additionally, as the country’s long-term favorable demographics remain intact, we forecast Vietnam’s beer consumption volume to grow at a 5% CAGR in 2023–2028F.

Prolonged strict enforcement of drunk driving laws to slow down medium-term beer consumption. While Decree 100/2019/ND-CP on administrative penalties for road and rail transport (Decree 100) came into effect on January 1, 2020, its enforcement, especially on drunk driving (referred to as drunk driving laws), only became stricter in early 2023. On June 27, 2024, the National Assembly (NA) passed the Law on Traffic Order and Safety, which continues the zero-alcohol tolerance policy on drunk driving. In our view, this may negatively impact medium-term beer consumption, while consumers may adapt by shifting towards off-trade channels (i.e., alcohol sold for consumption elsewhere) and/or using ride-hailing services post-drinking on-trade (i.e., immediate consumption on the premises) in the long term.

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