Chongqing Brewery 2025 Outlook: Navigating Flat Volumes, ASP Pressure, and Channel Expansion
Broker: UOB Kay Hian
Date of Report: Monday, 18 August 2025
Chongqing Brewery 2025 Outlook: Navigating Flat Volumes, ASP Pressure, and Channel Expansion
Investment Highlights: BUY Rating Maintained, Target Price Adjusted
- Recommendation: BUY (Maintained)
- Revised Target Price: Rmb67.40 (previous: Rmb71.30), representing a 22.0% upside
- Share Price (as of report): Rmb55.26
- Market Cap: Rmb26.74bn (US\$3.72bn)
- 52-week Range: Rmb77.00 / Rmb50.85
- Major Shareholders: Carlsberg Hong Kong (42.54%), Carlsberg Chongqing (17.46%)
Chongqing Brewery (CBC), the fifth-largest beer company in China and Carlsberg Group’s exclusive platform for its China beer assets, remains a compelling play in the consumer staples sector amid channel shifts and cost tailwinds.
2Q25 and 1H25 Performance: Flat Volumes, ASP Weakness, and Margin Resilience
In the second quarter of 2025, CBC reported a 2% year-on-year (yoy) decline in revenue to Rmb4,484m, attributable mainly to a 2% drop in average selling price (ASP). Beer sales volume remained flat, underscoring the resilience of the company’s core business despite challenging market conditions.
Key Financials: 2Q25/1H25
| Metric |
2Q25 |
2Q24 |
yoy % chg |
1H25 |
1H24 |
yoy % chg |
| Total revenue (Rmbm) |
4,484 |
4,568 |
-1.8 |
8,839 |
8,861 |
-0.2 |
| – Premium |
2,662 |
2,692 |
-1.1 |
5,265 |
5,263 |
0.0 |
| – Mainstream |
1,595 |
1,654 |
-3.6 |
3,145 |
3,174 |
-0.9 |
| – Economy |
105 |
100 |
4.8 |
196 |
186 |
5.4 |
| Gross profit (Rmbm) |
2,296 |
2,305 |
-0.4 |
4,405 |
4,361 |
1.0 |
| Gross profit margin (%) |
51.2 |
50.5 |
+0.8ppt |
49.8 |
49.2 |
+0.6ppt |
| EBIT (Rmbm) |
1,078 |
1,087 |
-0.9 |
2,210 |
2,173 |
1.7 |
| EBIT margin (%) |
24.0 |
23.8 |
+0.2ppt |
25.0 |
24.5 |
+0.5ppt |
| Net profit (Rmbm) |
392 |
449 |
-12.7 |
865 |
901 |
-4.0 |
| Net profit margin (%) |
8.7 |
9.8 |
-1.1ppt |
9.8 |
10.2 |
-0.4ppt |
| Core net profit (Rmbm) |
388 |
442 |
-12.3 |
855 |
888 |
-3.7 |
| Core net profit margin (%) |
8.6 |
9.7 |
-1.0ppt |
9.7 |
10.0 |
-0.3ppt |
| Sales volume (m hl) |
9.17 |
9.17 |
0.0 |
18.01 |
17.84 |
1.0 |
| ASP (Rmb/kl) |
4,755 |
4,848 |
-1.9 |
4,779 |
4,834 |
-1.1 |
| COGS (Rmb/kl) |
2,385 |
2,468 |
-3.4 |
2,463 |
2,523 |
-2.4 |
- Core net profit in 2Q25 fell 12% yoy, mainly due to higher income taxes.
- Gross profit margin improved by 0.8ppt in 2Q25 and by 0.6ppt in 1H25, as raw material costs eased.
- EBIT margin expanded, reflecting operational discipline.
Segment Overview: Premium Flat, Economy Outperforms
- Premium Segment: Revenue was flat yoy for 1H25, at Rmb5,265m.
- Mainstream Segment: Revenue declined 1% yoy to Rmb3,145m in 1H25.
- Economy Segment: Revenue grew 5% yoy to Rmb196m in 1H25, the only segment to register positive growth.
Strategic Channel Shift: Off-Trade Expansion to Counter On-Trade Weakness
The on-trade channel remained weak throughout 2Q25, while off-trade channels—including emerging instant retail—showed solid growth momentum. CBC’s strategy is to intensify focus on off-trade channels to compensate for the softness in on-trade. Notably, the company’s canning rate rose to 29% in 2Q25, with brands like Wusu and 1664 achieving double-digit growth in canned product sales volume.
Cost Management: Raw Material Relief and Future Outlook
- COGS per unit: Fell 2% yoy to Rmb2,463/kl in 1H25 and dropped 3% yoy to Rmb2,385/kl in 2Q25.
- Management expects continued cost benefits from lower raw material prices into 2H25, but sees these advantages moderating in 2026.
- The Foshan plant is running at 60–70% capacity utilization, leaving ample room for further expansion in both beer and the newly extended beverage business.
Earnings Revision and Risk Assessment
- 2025 and 2026 earnings forecasts have been revised down by 4% and 6%, respectively.
- Revenue forecasts for 2025 and 2026 are cut by 3% and 4%, respectively, while gross margin estimates are raised by 0.3ppt each year to reflect lower raw material costs.
- Selling expense ratio is maintained unchanged in the model.
Valuation and Recommendation
- Rating: Maintain BUY
- Target Price: Rmb67.40 (5% lower than previous)
- Implied Valuation: 25.5x 2025F PE, 24.5x 2026F PE
- Current Valuation: 20.9x 2025F PE, 20.1x 2026F PE
Financial Summary and Outlook
Key Financial Estimates
| Year to 31 Dec (Rmbm) |
2024 |
2025F |
2026F |
2027F |
| Net turnover |
14,645 |
14,679 |
14,981 |
15,373 |
| EBITDA |
3,685 |
3,844 |
4,023 |
4,242 |
| Operating profit |
3,109 |
3,232 |
3,354 |
3,515 |
| Net profit (adj.) |
1,115 |
1,278 |
1,330 |
1,399 |
| EPS (Fen) |
230.3 |
264.1 |
274.8 |
289.1 |
| PE (x) |
24.0 |
20.9 |
20.1 |
19.1 |
| P/B (x) |
22.6 |
21.8 |
21.4 |
21.0 |
| EV/EBITDA (x) |
7.3 |
7.1 |
6.9 |
6.6 |
| Dividend yield (%) |
4.3 |
4.8 |
5.0 |
5.2 |
| Net margin (%) |
7.6 |
8.7 |
8.9 |
9.1 |
| ROE (%) |
67.0 |
105.9 |
107.4 |
110.9 |
| Net debt/(cash) to equity (%) |
-35.4 |
-60.1 |
-66.0 |
-71.3 |
Balance Sheet and Cash Flow Highlights
- Strong cash position: Ending cash forecast to rise from Rmb1.08bn in 2024 to Rmb4.20bn in 2027.
- Healthy operating cash flow: Projected to increase from Rmb2.54bn (2024) to Rmb3.66bn (2027).
- No interest-bearing debt: Zero short-term and long-term debt projected through 2027.
- Substantial dividend payments: Consistent return of capital to shareholders.
Key Investment Takeaways
- Despite a challenging environment and flat volumes, Chongqing Brewery’s disciplined cost management, strategic channel pivot, and steady expansion in economy and off-trade segments underpin resilience.
- Cost tailwinds from lower raw materials are expected to persist in the near term, though will likely moderate from 2026.
- The company is well-placed to capture further growth via instant retail and beverage diversification, supported by ample plant capacity.
- At current valuations and with a robust dividend yield, CBC remains an attractive consumer staples play for investors seeking stable returns and long-term upside in China’s beverage sector.
