Tsingtao Brewery's net profit growth has sharply decelerated in the past two years: Both Q4 figures declined, underperforming market expectations

$Tsingtao Brewery (600600.SH)$$TSINGTAO BREW (00168.HK)$

As one of the leading players in China's beer industry, Tsingtao Brewery (600600.SH) delivered an overall passable performance for 2025, but the pressures it faced remained relatively evident.

According to Tianyancha and the 2025 annual report, Tsingtao Brewery owns 56 wholly-owned and controlled beer production enterprises domestically, as well as 2 associated and joint venture beer production enterprises, distributed across 20 provinces, municipalities, and autonomous regions. Its scale and market share rank among the leading positions in the domestic beer industry. The Tsingtao Beer it produces is the most well-known Chinese brand in the international market, marketed in over 120 countries and regions worldwide.

So, how did Tsingtao Brewery perform specifically in 2025?

Single-digit growth in performance, with net profit growth rate slowing sharply in the past two years

In 2025 (during the reporting period), the company achieved total product sales volume of 7.648 million kiloliters, revenue of 32.47 billion yuan, representing a year-on-year increase of 1.04%; net profit attributable to shareholders of the listed company was 4.588 billion yuan, a year-on-year increase of 5.60%; net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was 4.13 billion yuan, a year-on-year increase of 4.53%.

Meanwhile, the company's gross margin was 41.84%, an increase of 1.61 percentage points year-on-year.

Tsingtao Brewery stated that during the reporting period, the company focused on expanding incremental space through 'new products, new channels, new demographics, new scenarios, and new demands,' innovating systems, mechanisms, and market operation models, optimizing resource allocation, and continuously deepening and expanding both domestic and overseas markets. In its traditional advantageous markets along the Yellow River, the company implemented meticulous operations, further consolidating its market-leading position, with market share and profitability continuously strengthened. The contiguous development effect in northern markets has become increasingly evident. In southern markets, through positive accumulation, the company continuously optimized and upgraded its product mix, focusing on regional and channel breakthroughs to achieve quality growth. In overseas markets, through product innovation, regional expansion, brand strengthening, model breakthroughs, and strategic upgrades, the company steadily advanced its 'one arc, three wings, multiple points' market layout, achieving local production and sales in international markets for the first time, with the brand’s international influence continuously improving.

Observing nearly a decade from 2017 to 2025, Tsingtao Brewery's revenue maintained weak single-digit growth, while net profit attributable to shareholders began to slow sharply starting from 2024.

At the investor communication event on March 27, an investor asked whether the company would focus more on consolidating its base market or developing markets with lower market share?

Tsingtao Brewery introduced that currently, the company is carrying out market layout and development nationwide. In its traditional advantageous markets along the Yellow River, the company has implemented meticulous operations, further consolidating its market-leading position, with market share and profitability continuously strengthened. The contiguous development effect in northern markets has become increasingly evident. In southern markets, through positive accumulation, the company continuously optimized and upgraded its product mix, focusing on regional and channel breakthroughs to achieve quality growth.

Both metrics declined in Q4, weaker than market expectations

In its research report dated March 31, Wanlian Securities pointed out that the company's beer business in 2025 showed steady progress, with main brands and mid-to-high-end sales maintaining growth. However, there was a slight year-on-year decline in performance in Q4 of 2025. Benefiting from low costs of beer raw materials like barley, an improved product mix, and stable cost control, both gross margin and net profit margin for 2025 increased. In the short term, the benefits of cost reductions are expected to continue, with the recovery of the catering industry and the 2026 World Cup potentially driving a rebound in beer demand. In the long term, as a leading domestic beer producer, the company has made significant inroads into the high-end/ultra-high-end markets in recent years, and there is still room to enhance its product mix.

Indeed, in Q4 of 2025, Tsingtao Brewery reported revenue of 3.107 billion yuan, representing a year-on-year decrease of 2.26%; net profit attributable to shareholders dropped by 6.41% year-on-year to -686.3 million yuan. Beer sales volume slightly declined in Q4, down 0.13% year-on-year to 7.54 million kiloliters, with the sales volume of the Tsingtao main brand decreasing by 0.20% year-on-year, while other brands remained flat year-on-year.

In other words, whether the company’s performance will improve in the first quarter of this year is also a key focus for investors.

Wanlian Securities' earnings forecast and investment advice indicate that in the short term, the benefits of cost reductions are expected to continue, with the recovery of the catering industry and the 2026 World Cup likely to boost beer demand. In the long term, as a leader in domestic beer production, the company has expanded its presence in the high-end/ultra-high-end markets in recent years, and there remains room to further upgrade its product mix.Due to lower-than-expected performance in Q4 of 2025, we have revised our earnings forecast for the company. We now expect net profit attributable to shareholders to reach 4.927 billion, 5.145 billion, and 5.314 billion yuan in 2026, 2027, and 2028, respectively (previously forecasted at 5.229 billion and 5.644 billion yuan for 2026 and 2027). This represents year-on-year growth of 7.38%, 4.44%, and 3.29%, with corresponding EPS at 3.61, 3.77, and 3.90 yuan per share. The PE ratio based on the March 31 stock price stands at 17/16/16 times. We maintain our 'Outperform' rating.

Meanwhile, Guosen Securities noted that in 2025, the company accelerated the development of emerging channels, with online business growing rapidly. It also adapted to consumption trends by expanding into fresh, draft, and craft beer products, providing momentum for sustained and stable development. It is expected that in 2026, the company will continue to drive product innovation and embrace new channel scenarios. Currently, the white beer brand has strong momentum, and the market foundation for Tsingtao Classic is solid. Sales of mid-to-high-end products are expected to continue growing.

Considering the slow recovery in alcohol consumption demand, a slowdown in the company's product mix upgrade, and rising aluminum can prices that could diminish cost benefits, we have slightly lowered our earnings forecasts for 2026-2027 and added a forecast for 2028. We project total operating revenue of 32.85 billion, 33.22 billion, and 33.71 billion yuan for 2026, 2027, and 2028, respectively (previous forecasts for 2026-2027 were 33.25 billion and 33.92 billion yuan), with net profits attributable to shareholders at 4.71 billion, 4.85 billion, and 5.0 billion yuan (previous forecasts for 2026-2027 were 4.98 billion and 5.26 billion yuan), and EPS at 3.46, 3.56, and 3.66 yuan, respectively. The current share price corresponds to a PE ratio of 18/18/17 times. The company's steadily increasing dividend payout ratio strengthens shareholder returns, and we maintain our 'Outperform Market' rating.

Although some brokerages have lowered their earnings forecasts, the core strength of Tsingtao Brewery is still generally viewed positively by the market.

Huayuan Securities pointed out that in terms of product mix, the company's Tsingtao brand achieved sales volume of 44.94 million tons, up 3.5% year-on-year, with the sales mix improving by 1.2 percentage points compared to the same period in 2024 to 58.8%. Among these, products in the mid-to-high-end and above categories reached sales of 33.18 million kiloliters, up 5.2% year-on-year. Sales volumes of classic series, white beer, and ultra-high-end series products from Tsingtao Brewery continued to hit record highs, with particularly rapid growth in white beer sales, ranking first in the industry’s white beer category. In 2025, the company aligned closely with new consumer demands by launching innovative products such as 'Jasmine White Beer,' continuously optimizing its product portfolio and strengthening its core advantages as a leading enterprise.

Regarding the 2026 operational plan, Tsingtao Brewery stated that it would continue to focus on its core beer business, leveraging the advantages of the Tsingtao brand, quality, and channel network to actively expand the market. It aims to deepen regional tiered operations within the domestic market, consolidate its stronghold in northern base markets by increasing volume and upgrading structure, and focus on breakthroughs in strategic southern markets. By enhancing management innovation, optimizing networks, and adopting innovative models, it seeks to steadily expand its market share. In overseas markets, it will explore international expansion through diverse cooperation models, continually enhancing global brand influence. It will firmly implement its '1+1+1+2+N' product strategy, concentrating resources on key large-volume products like 'Classic, Pure Draft, and White Beer,' while accelerating development in new segments such as 'all-malt, fresh beer, zero-sugar light beer, craft beer, and non-alcoholic/low-alcohol beer.' It will fully develop its 'five-new' businesses to create new growth opportunities. The company will leverage the radiating role of its world-class R&D center to build unique competitiveness in products and brands via technological breakthroughs, empowering full-category innovation and industrial upgrading. (Produced by Harbor Finance)

Harbor Business Observer - Wang Lu

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