• Maintain BUY, with new MYR23.10 TP from MYR22.20, 18% upside and c.6% FY25F yield. Carlsberg Brewery’s 9M24 results exceeded expectations on better-than-expected margin. Valuation is undemanding at -1.5SD from its 5-year mean, which we think is unwarranted given the solid earnings delivery and generous dividend payout notwithstanding the soft market environment. The resilient performance should sustain thanks to demand stickiness, rising tourist arrivals, and margin expansion brought about by premiumised product mix and price increases.

• Carlsberg’s 9M24 results were above expectations. Core net profit of MYR270m (+9% YoY) accounted for 79% and 80% of our and consensus forecasts on better-than-expected profit margin. Post results, we lift FY24F26F earnings by 6%, 5%, and 1%. Correspondingly, our DDM-derived TP rises to MYR23.10 (inclusive of a 6% ESG premium), which implies 18x FY25F P/E or below the stock’s 5-year mean. This represents a discount to peer Heineken (HEIM MK, BUY, TP: MYR29.60), taking into account the market leadership in Malaysia and a more generous dividend payout.

• Results review. YoY, 9M24 revenue rose 7% to MYR1.8bn driven by the robust growth in Malaysia (+10%) on the back of longer selling period for the Lunar New Year and price increases effective Apr 2024. This has more than offset the softness of Singapore operations (-2%) which was affected by the transition of its premium brand. 9M24 PBT margin stood at 19.4% (+0.1ppt), as the price increase expanded the margin effectively starting 2Q24. QoQ, 3Q24 revenue was 10% higher atMYR556m, reflecting the full effect of price raises whilst 2Q24 was a low base due to the pre-price increase frontloading. As a result, 3Q24 core net profit jumped 14% to MYR91m. 9M24 DPS amounted to MYR0.65, higher vs MYR0.62 in 9M23.

• Outlook. 4Q24F numbers should be boosted by the earlier timing of the Lunar New Year in 2025 (29 Jan vs 2024: 11 Feb). Beyond the immediate term, whilst volume growth is not expected to be exciting considering the cautious consumer sentiment on the back of heightened inflationary pressures, the premiumisation strategy and margin uplift from price increases should continue to drive commendable earnings growth. In addition, we expect CAB to remain focused on driving operational efficiency and stimulate consumer spending with strategic marketing engagements as well as new product launches.

• Risks to our recommendation include unfavourable regulatory changes and a major loss of market share.

Source: RHB Securities Research - 11 Nov 2024