Summary of the 2021 9M results of Sabeco JSC (SAB VN)
9M/2021 results: Highlights
- SAB posted a total net revenue of VND17,370bn, a decrease of 13.6% y/y, primarily due to a decline in beer sales which accounted for 89.3% of total revenue. Beer’s sales volume fell by 47.8% y/y in Q3 because of (1) the COVID-19 lockdown for most of the quarter leading to almost no on-trade sales, (2) a drop in off-trade sales as the gradual vaccination rollout in Q3, caused people to avoid alcohol for health reasons, and (3) early logistics disruption as beer is classified as a non-essential product. As a result, beer revenue fell by 12.9% y/y in 9M/2021 to VND15,618bn. The remaining revenue from other products (soft drinks, alcohol, trading raw materials) dropped 18.7% y/y to VND1,870bn.
- Because of (1) a strong up-cycling trend of input materials (malt, aluminum), (2) a sharp decrease in the selling volume during the prolonged lockdown in Q3/2021, and (3) an adoption of the “3 on-site” model during the COVID-19 period, 9M/2021 net profit declined by 25.7% y/y to reach VND2,529bn, with a net margin of 14.6%.
- Financial health is solid (cash & deposits accounting for 65.8% of total assets), and leveraging is low (D/E and D/A ratios of 0.03x and 0.02x, respectively).
Outlook 2021-2022
- For 2021: based on GSO, a -10.4% y/y in consumer income in 9M/2021 and a -19.5% y/y in the October’s FMCG index due to COVID-19 are causing a weaker Q4 than previously predicted. Although HCM City and other Southern provinces have re-opened since October 1st restaurants can only serve alcohol in certain areas with a 50% capacity. In addition, while taxi and motorbike taxi operations are still restricted, the strict enforcement of drink driving penalties from early 2020 continue to burden the on-trade channel. As a result, we reduce our estimates for Q4’s beer sales volume by 17.1% to 383 mn liters (-6.5% y/y). We forecast 2021F net revenue to be VND24,734bn (-11.5% y/y), while net profit will be VND3,897bn (-21.1% y/y), with a net margin of 15.8%, significantly lower than the average decrease in revenue and profit of 22.1% and 65.6% y/y respectively, observed in regional beer brands during their unvaccinated period in 2020 (Vietnam has been severely affected in 2021 while nearby countries were in 2020 due to a lack of vaccination).
- For 2022: we estimate 2022F net revenue to be VND31,177bn (+26.1% y/y) and net profit to be VND4,726bn (+21.3% y/y). The key drivers are: (1) strong recovery of sales volumes vs the low base of 2021, (2) consumers switching to more affordable mid-priced and economy beers (SAB’s dominant segment) due to lower income.
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