Carlsberg reported a core PATAMI of RM207.2m (+19% YoY) for FY21, which came in above ours but was in line with consensus estimates, at 120% and 101% respectively. The discrepancy was due to Carlsberg’s lower-than-expected operating costs, owing to its restructuring efforts. We revise our FY22/23f estimates upwards by 11%/5%, to take into account the lower operating expenses. Our DCF-derived TP is subsequently raised to RM21.43 (WACC: 8.0%, TG: 2.5%). Maintain HOLD on Carlsberg.

Beating expectation. Carlsberg’s 4Q21 core PATAMI of RM75.4m (+140% QoQ, +67% YoY) brought FY21’s to a sum of RM207.2m (+19% YoY). The results came in above ours but was within consensus forecasts, at 120% and 101% respectively. The positive surprise was due to the lower-than-expected operating costs, owing to the group’s restructuring efforts. 4Q21 core PATAMI was arrived at after adjusting for forex gains and write-down of disused plants amounting to RM4.0m.

Dividend. Declared a DPS of 46 sen (4Q20: 30 sen). FY21: 56 sen vs FY20: 40 sen.

QoQ. Revenue jump of 55.3% was mainly encouraged by the reopening of economy as well as due to a low base effect (brewery was closed for 11-weeks in 3Q21). Year end festivals and early sell-in for Chinese New Year 2022 also contributed to the top line growth. In tandem with the stronger turnover, coupled with better profit contribution from Lion Brewery (+90%), core PATAMI surged by 140%.

YoY. The 15% increase in revenue was boosted primarily by its Malaysia operations, on the back of the reopening of economy as well as price increase for certain products. Consequently, core PATAMI also grew by a larger quantum of 67%, owing to the stronger profit contribution (+56%) from its associate company, Lion Brewery.

YTD. Sales was flat (-0.7%) as the better sales contribution from Singapore was neutralized by the lower overall sales in Malaysia. This was predominantly due to a longer suspension of operations in its brewery (FY21: 11 weeks vs FY20: 7 weeks). That said, core PATAMI still delivered a 19% growth, thanks to lower overall operating expenses and better “premiumisation” mix, despite flattish contribution from Lion Brewery (+1.7%) and the absence of government grant received by its Singapore operations last year.

Outlook. While dine-in and domestic travel restrictions have been eased, the outlook remain cautious given the inflationary pressures as well as a shift in consumer behavior (avoiding large events or mass gatherings). Management remains committed to mitigate the headwinds faced by hedging its input costs and strict cost management. On a side note, Carlsberg has also allocated an additional RM110m of capex for its brewery upgrade (to complete by end-FY22). This will entail larger filling capacity, higher automation to boost efficiency and also better sustainability performance in energy, water and waste management.

Forecast. We revise our FY22/23f forecasts upwards by 11%/5%, to account for the lower operating cost arising from its restructuring initiatives.

Maintain HOLD. TP: RM21.43. Our DCF-derived TP is subsequently revised upwards to RM21.43 (WACC: 8.0%, TG: 2.5%), from RM20.40 after our earnings revision. Maintain HOLD call on Carlsberg.

Source: Hong Leong Investment Bank Research - 18 Feb 2022