Tsingtao Brew has reported 9M26 results:revenue/attributable net profit/recurring net profit came in at RMB28,040/5,050/4,630mn,down 4.5/4.2/5.9%YoY.In 3Q26,revenue/attributable net profit/recurring net profit were RMB8,380/1,140/960mn,down 5.6/17.1/25.3%YoY.On the top line,beer volume/ASP fell 9.1%/rose 3.9%YoY in 3Q26.Volume was under significant pressure due to destocking,rainy weather,and weak restaurant demand,with low-end products shrinking.Meanwhile,growth in Qinggan,white beer,and Classic drove mix upgrade and ASP gains.On profitability,higher per-tonne costs and arising expense ratio pushed 3Q26 gross margin/attributable net margin down 1.4pp/1.9pp YoY.Looking ahead,we believe that arecovery still hinges on consumption and weather-driven demand.Qinggan,as alow-calorie health product,is scaling rapidly and could become the next hero product.BUY.
3Q volume pressured,mix upgrade accelerated
For 9M26,beer volume fell 6.2%YoY to 6.47mt,while ASP rose 1.8%YoY.In 3Q26,volume/ASP declined 9.1%YoY and rose 3.9%YoY.Industry sales were pressured by rainy weather,soft consumption,and destocking;per Wind,9M26 industry beer output decreased 6.0%YoY.By mix,9M26 sales volume for midrange-to-high-end products/main-brand low-to-mid-end products/Laoshan and other brands changed by+2.0%/-9.5%/-13.4%YoY.In 3Q26,these segments changed by+0.7%/-12.8%/-18.2%YoY.The midrange-to-high-end volume share continued to rise.Qinggan,leveraging its health positioning(zero sugar,low calorie),hit its full-year target in 9M26 and became anew sales growth driver.We believe white beer grew rapidly on category tailwinds,Classic stayed relatively stable thanks to resilient pricing,Draft was slightly pressured by weak restaurant demand,and low-end beer was significantly pressured by weaker spending power in township markets.
Higher costs and weaker scale effects dented net margin
For 9M26,gross margin was 44.0%,up 0.4pp YoY.In 3Q26,gross margin fell 1.4pp YoY,as ASP/per-tonne cost rose 3.9/6.5%YoY.Higher aluminum can and freight costs in 3Q26,along with weaker scale effects,drove cost pressure.On expenses,for 9M26,the selling/administrative expense ratios were 11.3/3.9%,down 0.3pp/up 0.5pp YoY;in 3Q26,they rose 1.4pp/1.2pp YoY,as weaker scale effects pushed expense ratios higher.In addition,3Q26 fair value gains/asset disposal gains rose RMB77.32/71.04mn YoY,mainly on higher wealth management income.As aresult,the 9M26 attributable net margin was 18.0%,up 0.1pp YoY,while 3Q26 attributable net margin was 13.6%,down 1.9pp YoY.
Earnings forecasts and valuation
Given the rainy weather impact during peak season and elevated cost pressure,we lower our earnings forecasts.We now expect 2026/2027/2028 EPS of RMB3.18/3.27/3.37,representing 7%downward revision each year.Based on an average 18x 2027E PE for comparable companies on Wind consensus,we assign an 18x 2027E PE for the A-shares,deriving atarget price of RMB58.86(previous:RMB61.74,based on 18x 2026E PE).For the H-shares,referencing the 72%A/H ratio since 2H24,we assign a13x 2027E PE,deriving atarget price of HKD49.66(previous:HKD51.54,based on 13x 2026E PE).Maintain BUY.
Risks:intensifying competition,weaker industry demand than we expect,and food safety issues.