October 29, 2020
Investors are reinstating the AB InBev beer group somewhat after surprising volume growth. “With a better view of the debt reduction, a price gain of 60 percent is in the cards,” say the analysts.
“With a 2.6 percent volume growth in its own beers, AB InBev outclasses Heineken (-1.9%) and Carlsberg (+ 2.4%),” notes the Jefferies stock exchange. Analyst Edward Mundy does not see the fact that AB InBev does not pay an interim dividend as problematic. “Investors may be a bit disappointed at first, but nothing has been lost yet.” CEO Carlos Brito is keeping the door open to make an interim payment in February.
In addition to Covid-19, the beer sector is plagued by volume pressure and increasing competition. “The fact that AB InBev is gaining market share in its major markets is encouraging,” says Mundy, “and may offer investors some relief despite the cut dividend.” The analyst sees a strengthening of the commercial strength and compliments the rollout of a B2B sales platform.
Jefferies believes the stock market price (AB InBev has lost 40 percent since January) estimates too grim a post-covid scenario for AB InBev. “If we get more insight into the growth strategy and the deleveraging, we see an upward potential of 60 percent,” says the analyst, repeating his buy advice for the Brussels heavyweight.
Out of the park
The results of his ‘out of the park’, stock exchange Kepler responds, which also repeats his purchase advice. “The gross operating profit is 10 percent higher than our expectations and the performance in Latin America in particular is impressive,” he said. AB InBev achieved volume growth of 25 percent in Brazil thanks to the success of the local beer Brahma Dople Malte.
“The recent increase in corona infections in a number of regions and increased restrictions are creating some uncertainty about the short-term outlook,” says KBC Securities. “But the resilience shown by the results in the third quarter confirms the investment case,” said analyst Wim Hoste, who has one of the highest price targets for AB InBev in the analyst corps, namely 80 euros, good for an upside potential of more than 85 percent.
AB InBev wins 3 percent at the opening of the trade.
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