Ambev (ABEV3) in the second quarter of 2022 brought record beer sales, which, according to some comments at the time, were overshadowed by margins still under pressure due to higher commodity prices. However, for some homes, the market is ignoring some catalysts that could lead the company to deliver better results in the future, both in the short and long term.
“We believe investors are looking at the glass half empty, focusing on lower profit margins, which have been materially affected by higher commodity prices, shifts in the mix, inflationary pressures, and investments in new, fast-growing business units,” the analysts say. Rikia and Fernanda Sayao, of Credit Suisse, report.
For analysts, while restoring margins is important, the Brazilian brewery is undergoing a profound digital and cultural transformation — particularly BEES, the company’s platform targeting bars and restaurants, “which goes far beyond selling beer.”
“We recognize that it is still in its early days, but it has the potential to become a major shareholder in Ambev, as it creates value through growth in net sales and incremental operating profit, with limited additional investment and negative capital dynamics spinning,” the experts say.
For Recchia and Sayão, the platform has revolutionized Ambev’s relationship with nearly a million customers. They actually use the platform for about 31.5 minutes per week, which translates to higher loyalty, and 95% of them are already using the rewards program.
In addition, they highlighted that the company uses data from BEES to fuel its AI algorithms, and improve revenue management initiatives, which ultimately translates into pricing and blend improvements.
“With Ambev Logistics, BEES serves approximately 80,000 orders per day. The brewery has already identified opportunities to develop complementary categories, in addition to beer, and to leverage its distribution business,” they explain.
They remember that Ambev, in the second quarter of this year, actually started disclosing earnings numbers with non-Ambev products on its balance sheet.
“In addition to improving company disclosures, we are now isolating BEES in our estimates, cautiously modeling sales growth in line with inflation, coming in at 0.15% of the address market and a gross cash margin of 12.5% through 2027, which is conservatively lower than the AmBev report. Intent ‘, they concluded on the podium.
Credit Suisse set a target price for the platform between R$0.12 and R$0.18, compared slightly to a screen price of R$15.95 at its opening Thursday, but they argue that the software could become a major key point in the future.
The World Cup is a short-term catalyst for Ambef
In the short term, Ambev and its platforms – both BEES and Zé Delivery, which sell directly to consumers – should navigate the World Cup.
“We believe that the brewery is well positioned to meet consumer demands with its broader portfolio of brands and that it can take advantage of its platforms. It is worth noting that Zé Delivery operates in 297 cities, reaching nearly 55% of the Brazilian population, according to a survey by Meta , with the participation of a thousand participants, 84% of people intend to attend the tournament, of whom 65% intend to drink alcoholic beverages,” the supplement.
For Credit Suisse, Ambev should close 2022 with 4% growth in turnover. In addition to positioning, the cup contract should be in the summer and Oxelio Brazil as well Catalysts to change in the level of sales.
In addition, experts also draw attention to the fact that the brewery is ahead of premium beer, while the Brazilian consumer is ripening in his taste for the product.
Leonardo Alencar and Pedro Fonseca, analysts at XP Investimentos, are heading in the same direction.
“We found limited statistical evidence that the World Cup could be a major driver of beer demand growth in the fourth quarter, but we believe there are new factors to consider in addition to historical data, and therefore we remain optimistic.”
For them, Ambev and part of the beer industry must increase prices between July and September, since their remittances, until then, have not followed high inflation.
“As of January 2019, outdoor beer prices are 5% below the inflation rate, while home beer prices are 24% lower,” they say. “In our view, while packaging mixes may have taken their toll in the post-pandemic period, the situation, along with other factors, leaves scope for the industry to seek higher prices.”
For XP, Ambev may also combine price hikes with the recent drop in commodity prices, in pursuit of higher margins.
Seasonality suggests that production should continue to grow until October, with a small gap in November, but with a flat figure until December. Given its competitive advantages, led by BeeS, combined with a more moderate competitive outlook, we expect AmBev to outperform industry and set a new record for beer volume in the fourth quarter.”
Credit Suisse raised Ambev’s target price from R$ 16.50 to R$ 18 (Upside down 12.8%), with the recommendation Outperform. XP has the same recommendation, with a target of R$18.80 (Upside down 17.8%).
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