• 2020 core net profit came in at RM180.7m (-37.9% yoy) – broadly in line with both our and consensus expectations
• Excluding one-offs, 4Q20 registered decent qoq improvement as both revenue and core earnings rose to RM472.5m (+8.5% qoq) and RM50.3m (+23.8% qoq) respectively.
• We cut our 2021/22 earnings estimates by 4-6%, taking into account the renewed MCO and prolonged impact of the pandemic. Maintain HOLD with a slightly lower DCF-derived TP of RM22.70

2020 Core Net Profit at RM181m (-38% Yoy) – Within Expectations

Carlsberg posted a 2020 revenue of RM1.79bn (-20.9% yoy), attributable to lower sales at both Malaysia and Singapore operations which were impacted by the strict lockdowns. To note, Singapore sales fared relatively better for 2020, posting RM528.9m (-14.6%), a softer decline against Malaysia of RM1.26bn (-23.3%). Notwithstanding cost control measures, EBITDA margins shed -4ppt to 14.7%, flowing through from lower sales. Excluding one-off items (inclusive of RM6.4m settlement of custom’s bill and RM9.9m restructuring expenses), core net profit came in at RM180.7m (-37.9% yoy) – broadly in line with both our and consensus expectations (102%).

Near Term Likely to Remain Challenging

Following the easing of lockdown measures, both revenue and profit saw an improvement qoq, to RM472.5m (+8.5%) and RM50.3m (+23.8%) respectively. Looking ahead, we believe headwinds remain on the backdrop of the prolonged effects of the pandemic. The second MCO, which started in January 2021, will likely have slowed the recovery momentum of the brewers, particularly for on-trade businesses as dine-ins were disallowed. On top of that, limitations in movement also dampened the otherwise seasonally robust Lunar New Year period in 1Q. In coping with the tough operating conditions, the group is optimising cost structures aggressively while investing in viable channels suited to a post Covid-19 reality. Elsewhere, the group declared a DPS of 40sen for 2020 - below expectations.

Maintain HOLD

In view of the renewed MCO measures and a prolonged impact of the pandemic, we cut our 2021/22E earnings estimates by 4-6%, largely to factor in lower volume sales. Post revision, we reiterate our HOLD rating, with a lower DCF-derived TP of RM22.70. Up/downside risks: (i) earlier/longer-than-expected containment of Covid-19 and (ii) sharp decline/increase in raw-material costs.

Source: Affin Hwang Research - 19 Feb 2021