Anheuser Busch Inbev SA

Anheuser Busch InBev NV (NYSE: BUD) is a brewer's firm headquartered in Belgium. The company has almost 400 different beer brands. Global brands like Budweiser, Corona, and Stella Artois, as well as international brands like Beck's, Leffe, and Hoegaarden, and many local champions, make up the Company's brand portfolio. The Company's soft drinks industry is made up of its own manufacturing as well as agreements with PepsiCo for bottling and distribution between its numerous subsidiaries and PepsiCo.

Latest News

• First-Quarter 2022 Financial results announcement: AB InBev declared its 2022 first-quarter results on 28^th April 2022 and reaffirms its guidance for 2022 whole-year adjusted diluted Earnings Per Share.
• Decision to sell interest in Russian JV: Anheuser Busch InBev NV has declared that it will sell its non-controlling interest in the AB InBev Efes joint venture and is in active talks with its Turkish partner, Anadolu Efes, to buy it. As part of the release of its first-quarter results, AB InBev is de-recognizing its interests in AB InBev Efes and will declare a non-cash impairment charge of USD 1.1 billion in the non-underlying share of results of associates.

Q1 FY22 Financial results

• Surge in Top-line Financials: The company's revenue climbed by 11.1% year over year to USD 13.23 billion from USD 12.29 billion in Q1 FY22. Furthermore, overall quarterly volumes sold increased by 2.8% to 139.34 million.
• Increased profitability and operational efficiency: The normalized EBITDA of USD 4.48 billion indicated a 7.4% rise, with a normalized EBITDA margin of 33.9%, down 115 basis points. In 1Q22, EPS was USD 0.60, up from USD 0.55 in 1Q21. In 1Q22, normalized EPS was USD 0.67, up from USD 0.51 in 1Q21.
• Strong debt financials: BUD has a bond portfolio consisting of 93% fixed-rate bonds, with a pre-tax coupon of 4%. Bonds have a weighted average maturity of 16 years with a diverse currency mix, reducing FX risk.

Key Risks

• FX risk: BUD is an MNC with major of its revenue from outside of Europe. So, FX risk is one of the primary risks concerning the company as of the current Macroeconomic scenarios.
• Macro-economic risk: As per the current global condition, there is increased instability and volatility, especially in Europe, with the ongoing war between Russia- Ukraine, rising inflation, and growing energy sector crisis. Therefore, macro-economic factors become an important risk factor for the company and consumer staples industry.

Outlook

The company's EBITDA is expected to grow between 4 and 8 percent in the medium term, with revenue growth ahead of EBITDA due to a solid mix of volume and pricing. Depending on currency and interest rate movements, net pension interest and accretion expenditures are estimated to be in the range of USD 170 to 200 million per quarter, while loan coupons are forecasted to be around 4.0 percent in FY22. Finally, in FY22, the business intends to spend between 4.5 and 5.0 billion dollars on net capital expenditures.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

BUD's stock price has fallen only 1.34% in the past six months even in a bearish market and is currently leaning towards the lower end of its 52-week range of USD 52.65 to USD 79.67. The price is currently below short-term(50-day) SMA and long-term(200-day) SMA with the major resistance around the range of USD 57.72 and USD 59.21 if broken might start a good upside momentum. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 68.11.

Considering only 1.34% correction in the past six months while S&P 500 index fell 9.27% during the same time, strong production results for the first quarter of 2022, solid topline performance, positive outlook, associated risks, and current valuation. We recommend a " Buy" rating on the stock at the closing price of USD 55.69, as of June 03, 2022, at 11:15 AM PDT.

One-year technical chart as of June 03, 2022, at 11:15 AM PDT. Source: REFINITIV. Analysis by Kalkine group

Technical Analysis Summary

* Entry price as of June 03, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.