Review

• Carlsberg Brewery Malaysia Berhad’s reported 1QFY24 core net profit of RM87.9mn, accounting for 27.5% and 26.2% of our and consensus full-year estimates, respectively. The results were within consensus but above our expectations. The deviation was mainly due to rush trade purchases before the price adjustment, effective from 1 April 2024.

• 1QFY24 revenue rose 9.9% YoY to RM725.8mn, driven by a more extended selling period for Chinese New Year and additional trade purchases before the price adjustment. Core net profit also rose by 3.4% YoY to RM87.9mn, thanks to improved performance in Malaysia and higher share profit from Sri Lanka’s associate (+134.8% YoY to RM7.6mn).

• Sequentially, 1QFY24 revenue and core net profit improved by 25.0% QoQ and 10.6% QoQ, respectively. The better results were driven by improved performance in Malaysia and Sri Lanka’s associates, which offset lower profit in Singapore and higher recognition of deferred tax liabilities from foreign withholding tax in Sri Lanka associates.

• A first interim dividend of 22.0sen/share (vs. 21.0sen/share in 1QFY23) was declared for the quarter under review.

Impact

• We revised our earnings forecast upwards by 5.0%/0.6%/0.2% for FY24/25/26 after inputting the 2023 Annual Report’s figures and factoring in the recent beer price hike.

Outlook

• Overall, management is cautiously optimistic over the near-term outlook as sales volume for 2QFY24 should normalise after the price adjustment. We believe the group’s top line would improve from the increase in ASP in conjunction with the sustainable beer volume.

• We anticipate that the share price will benefit from improvements in tourist arrivals and increased out-of-home beer consumption with the reopening of bars and restaurants.

• Meanwhile, we believe that major sports events will have an insignificant impact on brewery players. (please refer to our sector reports dated 9 May 2024 for more details)

Valuation

• We maintain Buy on Carlsberg with a revised target price of RM24.50/share (previously: RM22.90/share) post the earnings adjustment and rolling forward our DCF valuation (k: 7.8%, g: 3.0%).

Source: TA Research - 14 May 2024