KUALA LUMPUR (May 14): Shares in Carlsberg Brewery Malaysia Bhd (KL:CARLSBG) surged to a three-month high on Tuesday, as analysts continued to recommend “buy” for the stock, following the group’s first-quarter results.

The counter added 32 sen to a high of RM19.76 during the morning trading session, its highest since Feb 8, 2024. At the closing bell, Carlsberg’s share price had climbed 18 sen or 0.93% to RM19.62 — giving it a market capitalisation of RM6 billion — after some 295,000 shares exchanged hands.

Carlsberg’s earnings are expected to grow despite potentially weak consumer spending due to inflation. Analysts believe that strong profit margins, driven by the company’s focus on premium products and price increases, will be the key factor behind this growth.

The downside to consumption will be cushioned by the less elastic demand for beer and effective clampdown on contrabands, said RHB Investment Bank.

“Its [Carlsberg’s] current valuation is undemanding, considering the diminished regulatory risks with the political stability, as well as [its] decent dividend yield,” said RHB IB.

Out of 10 analysts covering the stock, seven had their “buy” calls, while three had “hold” ratings, with a median target price of RM23.13, according to Bloomberg.

Although sales are expected to normalise downwards in the second quarter ended June 30, 2024 (2QFY2024), Hong Leong Investment Bank (HLIB) anticipates a 5% growth in the group’s topline growth, driven by the ongoing recovery of foreign tourists to Malaysia and Singapore, coupled with gradual improvements in labour prospects in the country.

“Considering the high base effect in 1Q2024 due to Chinese New Year sales and pre-hike sales boost, 2QFY2024 sales is expected to normalise downwards (i.e. weaker quarter-on-quarter).

“Our expectation of Sapporo sales replacing Asahi is imputed into our forecast, as Asahi held a relatively low market share in Malaysia. Coupled with anticipated higher advertising expenses for the Sapporo brand, we expect Carlsberg to deliver flat growth in FY2024,” HLIB added.

Carlsberg’s net profit for the first quarter ended March 31, 2024 (1QFY2024) rose 3.39% year-on-year (y-o-y) to RM87.93 million due to higher profit in Malaysia, as well as a higher share of profit in its Sri Lankan-based associate Lion Brewery (Ceylon) PLC, while revenue increased by 9.93% y-o-y to RM725.76 million.

It declared a first interim dividend of 22 sen per share for the financial year ending Dec 31, 2024 (FY2024), payable on July 11.