China: Tsingtao Brewery giving investors something to drink to

Chinese beermaker Tsingtao Brewery is giving investors something to drink to. The $15 billion company’s mainland-listed stock has surged 80% since the end of 2019, defying a slowing economy and pandemic lockdowns that kept the benchmark CSI 300 flat over that period, Reuters reported on June 2.

Tsingtao’s Hong Kong-listed shares are slightly less exuberant, but a long-expected exit by Fosun International, which took an 18% stake in 2018, should remove a major overhang.

Tsingtao’s rally has two potent ingredients. Firstly, the brewer raised prices by as much as 15% for some beverages, and curbed costs by hedging bets on key commodities such as barley and the metals used for packaging, according to Morningstar’s Jennifer Song. That boosted margins despite rising raw material prices. Net profit in the first quarter was up 17% from a year earlier.

Moreover, customers in the world’s largest beer market are getting a taste for fancier and more lucrative brews. Tsingtao’s premium products include a dubious-sounding whiskey-beer hybrid. Shareholders can party on.

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