Assessing China Resources Beer (SEHK:291)’s Valuation After Its Corporate Governance and ESG Excellence Awards Win

China Resources Beer (Holdings) (SEHK:291) just picked up top honors in both Corporate Governance and ESG Excellence Awards, a signal that its sustainability and oversight practices are increasingly aligned with long term, risk aware investors.

See our latest analysis for China Resources Beer (Holdings).

At around HK$27.0, the shares have delivered an 11.34% year to date share price return. However, the 3 year total shareholder return of minus 44.69% shows the longer term momentum has been weak despite this governance driven confidence boost.

If strong ESG credentials are on your radar, it could also be worth exploring fast growing stocks with high insider ownership as another way to uncover compelling ideas with aligned management incentives.

Yet with earnings still growing, the share price far below analyst targets and a meaningful intrinsic value discount, the key question now is whether China Resources Beer is a contrarian idea or if the market already anticipates its next leg of growth.

Price-to-Earnings of 13.6x: Is it justified?

On a price to earnings basis, China Resources Beer trades at 13.6 times earnings, which screens as undervalued versus both its own fair ratio and sector peers at the HK$27.0 close.

The price to earnings multiple compares what investors pay today for each unit of current earnings and is a key gauge for mature, cash generative consumer businesses such as beer and spirits. For China Resources Beer, a 13.6x multiple appears conservative relative to its recent earnings record and the positive growth forecasts currently available.

Current analysis indicates the market may be underpricing those earnings because 13.6x not only sits below the estimated fair price to earnings ratio of 14.4x, it is also well below both the Asian Beverage industry average of 19.4x and a peer group average of 27.9x. If sentiment and expectations were to normalise, the multiple could move closer to that fair ratio level over time.

Explore the SWS fair ratio for China Resources Beer (Holdings)

Result: Price-to-Earnings of 13.6x (UNDERVALUED)

However, lingering concerns around slowing volume growth and the risk of sustained margin pressure could limit potential valuation gains despite the appealing earnings profile.

Find out about the key risks to this China Resources Beer (Holdings) narrative.

Another View, SWS DCF Says the Discount Is Deeper

While the earnings multiple hints at modest undervaluation, our DCF model paints a far starker picture, with fair value near HK$55.8 versus the current HK$27. That 51.6% gap suggests the market could be heavily discounting future cash flows, or simply does not believe them yet.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out China Resources Beer (Holdings) for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 909 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own China Resources Beer (Holdings) Narrative

If you see the story differently or want to dig into the numbers yourself, you can build a personalized view in just minutes: Do it your way.

A great starting point for your China Resources Beer (Holdings) research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Do not stop with one opportunity. Use the Simply Wall Street Screener to pinpoint fresh stocks that match your strategy before the market fully catches on.

• Capitalize on mispriced potential by targeting companies that look cheap on future cash flows, starting with these 909 undervalued stocks based on cash flows.
• Ride powerful data driven trends by zeroing in on transformative businesses at the frontier of automation and machine learning through these 25 AI penny stocks.
• Strengthen your income stream by focusing on reliable payers with attractive yields using these 13 dividend stocks with yields > 3%.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com