China Merchants Securities has released a research report on BUD APAC (01876), noting that the company's second-quarter results highlight a trade-off between defending market share and maintaining profitability, with clear regional performance divergence.

Total shipments fell 4.1% year-on-year, while revenue declined 2.1% year-on-year. Revenue per hectoliter increased 2.1% year-on-year. Adjusted EBITDA dropped 9.7% year-on-year, with the EBITDA margin narrowing by 210 basis points to 27.6%.

The Chinese business dragged down overall performance, while strong results in South Korea and India were insufficient to trigger a revaluation. The brokerage believes the risk-reward profile is broadly balanced, maintaining a "Hold" rating until a sustainable organic recovery in China emerges. The target price has been cut from HKD 7.8 to HKD 7.1.

Where the core issue lies

The Chinese market remains the central problem. Shipments in the second quarter were down 9.7% year-on-year, with no signs of recovery in the dine-in channel. Demand remained weak in July, and management is cautious about the third quarter. BUD APAC management confirmed that despite some competitors raising prices in certain regions, the company has no plans to increase prices, prioritizing stable shipment volumes and rebuilding market share. Investments will continue into the second half of the year.

Additionally, a 10% to 20% rise in aluminum prices will create delayed hedge-related cost pressures in the second half of 2026 and 2027. Management also acknowledged that if earnings do not improve, the current dividend level may be difficult to sustain.