Broker: UOB Kay Hian
Date of Report: Monday, 18 August 2025
Chongqing Brewery 2Q25 Results: Navigating Market Headwinds with Channel Expansion and Cost Controls
Executive Summary: Chongqing Brewery Maintains BUY Rating Despite Margin Pressures
Chongqing Brewery (600132 CH), China’s fifth-largest beer company and Carlsberg Group’s exclusive Chinese platform, released its 2Q25 results revealing flat sales volumes but a dip in average selling prices (ASP). Despite revenue and profit declines, the company’s strategic shift toward off-trade channels and ongoing cost advantages underpin a maintained BUY rating, albeit with a trimmed target price. This comprehensive analysis unpacks Chongqing Brewery’s financial performance, segment trends, cost dynamics, and valuation outlook.
Company Overview and Market Position
– **Chongqing Brewery** ranks as China’s fifth-largest brewer by sales. – Acts as Carlsberg’s sole operational platform in the Chinese beer market. – Major shareholders: Carlsberg Hong Kong (42.54%), Carlsberg Chongqing (17.46%). – Current share price: RMB 55.26; Target price revised to RMB 67.40 (down 5%). – Market cap: RMB 26.7bn (approx. US\$3.7bn).
2Q25 and 1H25 Financial Performance Snapshot
| Metric |
2Q25 |
1Q25 |
2Q24 |
YoY Change |
1H25 |
1H24 |
YoY Change |
| Total Revenue (RMBm) |
4,484 |
4,355 |
4,568 |
-1.8% |
8,839 |
8,861 |
-0.2% |
| Gross Profit (RMBm) |
2,296 |
2,109 |
2,305 |
-0.4% |
4,405 |
4,361 |
+1.0% |
| Gross Margin (%) |
51.2 |
48.4 |
50.5 |
+0.8ppt |
49.8 |
49.2 |
+0.6ppt |
| EBIT (RMBm) |
1,078 |
1,133 |
1,087 |
-0.9% |
2,210 |
2,173 |
+1.7% |
| EBIT Margin (%) |
24.0 |
26.0 |
23.8 |
+0.2ppt |
25.0 |
24.5 |
+0.5ppt |
| Net Profit (RMBm) |
392 |
473 |
449 |
-12.7% |
865 |
901 |
-4.0% |
| Net Margin (%) |
8.7 |
10.9 |
9.8 |
-1.1ppt |
9.8 |
10.2 |
-0.4ppt |
| Sales Volume (m hl) |
9.17 |
8.84 |
9.17 |
0.0% |
18.01 |
17.84 |
+1.0% |
| ASP (RMB/kl) |
4,755 |
4,804 |
4,848 |
-1.9% |
4,779 |
4,834 |
-1.1% |
| COGS (RMB/kl) |
2,385 |
2,543 |
2,468 |
-3.4% |
2,463 |
2,523 |
-2.4% |
Segment Analysis: Premium, Mainstream, and Economy
– **Premium segment**: Revenue was nearly flat YoY in both 2Q25 and 1H25. – **Mainstream segment**: Declined 4% YoY in 2Q25, 1% down in 1H25. – **Economy segment**: Outperformed with 5% YoY growth in both periods. – Gross margin improved on cost relief, particularly from lower raw material prices.
Strategic Channel Shifts: Off-Trade Resilience Amid On-Trade Weakness
– Off-trade channels (retail, emerging instant retail) remain stable and are the company’s focus for growth. – On-trade channels (bars, restaurants) continued to underperform. – Initiatives in canning drove up the company’s canning rate to 29% in 2Q25, with strong double-digit growth for Wusu and 1664 canned beers. – Overall beer sales volume for 1H25 was 18.0m hl (+1% YoY).
Cost Management: Raw Material Tailwinds and Future Outlook
– COGS per kl dropped 2% YoY in 1H25 and 3% YoY in 2Q25, providing margin relief. – Management anticipates continued cost benefits in 2H25 but expects these advantages to moderate in 2026 as raw material prices stabilize. – The Foshan plant currently runs at 60-70% capacity utilization, supporting both beer and expanded beverage operations.
Key Financials and Valuation Metrics
| Year to 31 Dec (RMBm) |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
14,815 |
14,645 |
14,679 |
14,981 |
15,373 |
| EBITDA |
3,785 |
3,685 |
3,844 |
4,023 |
4,242 |
| Net Profit (adj.) |
1,337 |
1,115 |
1,278 |
1,330 |
1,399 |
| EPS (Fen) |
276.2 |
230.3 |
264.1 |
274.8 |
289.1 |
| PE (x) |
20.0 |
24.0 |
20.9 |
20.1 |
19.1 |
| Dividend Yield (%) |
5.1 |
4.3 |
4.8 |
5.0 |
5.2 |
| Net Margin (%) |
9.0 |
7.6 |
8.7 |
8.9 |
9.1 |
| ROE (%) |
63.7 |
67.0 |
105.9 |
107.4 |
110.9 |
| Net Debt/(Cash) to Equity (%) |
-74.6 |
-35.4 |
-60.1 |
-66.0 |
-71.3 |
Revised Earnings and Outlook
– 2025/26 earnings forecasts cut by 4%/6% respectively, reflecting lower revenue expectations but slightly higher gross margins from cost savings. – 2025/26 revenue forecasts trimmed by 3%/4%. – Gross margin for 2025/26 nudged up by 0.3ppt to incorporate ongoing raw material price relief. – Target price cut by 5% to RMB 67.40, implying a 25.5x 2025F PE and 24.5x 2026F PE. – The stock currently trades at 20.9x 2025F PE and 20.1x 2026F PE, offering valuation headroom.
Balance Sheet Highlights
– Strong net cash position, with net debt/cash-to-equity ratio expected to further improve from -35.4% in 2024 to -71.3% in 2027. – No short-term or long-term debt on the books. – Cash and short-term investments forecasted to rise from RMB 1.08bn in 2024 to RMB 4.20bn by 2027.
Cash Flow & Capital Allocation
– Operating cash flow is robust, forecasted to rise from RMB 2.54bn in 2024 to RMB 3.66bn in 2027. – Capex remains consistent at RMB 1.05bn annually from 2025-2027. – Dividend payout remains attractive, with yields projected to rise from 4.3% (2024) to 5.2% (2027).
Key Metrics and Growth Outlook
| Metric |
2024 |
2025F |
2026F |
2027F |
| EBITDA Margin (%) |
25.2 |
26.2 |
26.9 |
27.6 |
| Pre-tax Margin (%) |
19.9 |
22.5 |
23.0 |
23.5 |
| Net Margin (%) |
7.6 |
8.7 |
8.9 |
9.1 |
| ROA (%) |
9.5 |
11.0 |
10.2 |
9.6 |
| ROE (%) |
67.0 |
105.9 |
107.4 |
110.9 |
| Turnover Growth (%) |
-1.1 |
0.2 |
2.1 |
2.6 |
| EBITDA Growth (%) |
-2.6 |
4.3 |
4.7 |
5.4 |
| Net Profit Growth (%) |
-16.6 |
14.7 |
4.1 |
5.2 |
Investment Thesis and Conclusion
– Chongqing Brewery’s 2Q25 results reflect resilience in a challenging market, with flat volumes contrasting with ASP pressure. – The company’s focus on off-trade channels and innovation in packaging (canned beers) is paying off, particularly for products like Wusu and 1664. – Cost control remains a significant earnings lever, though its impact is set to moderate moving into 2026. – The balance sheet is exceptionally strong, with robust cash flow and no debt. – Current valuation provides a buffer, with the stock trading below the revised target PE multiples. – The maintained BUY rating is underpinned by stable fundamentals, a healthy dividend outlook, and ongoing strategic adaptation, despite near-term headwinds.
Key Risks:
Further deterioration in the on-trade channel.
ASP pressures persisting longer than anticipated.
Moderation of raw material cost savings in 2026.
Final Recommendation
– Maintain BUY. – Target price: RMB 67.40 (cut by 5%). – Upside potential: +22% from current share price.
For investors seeking exposure to China’s evolving beer market with high cash-generation, a strong brand portfolio, and disciplined capital management, Chongqing Brewery stands out as a compelling, defensive play with growth optionality.
