Review

• Carlsberg Brewery Malaysia Berhad’s (CARLSBG) 1HFY23 core net profit of RM173.3mn came in within expectations at 54% and 52% of ours and consensus’ full-year forecast, respectively.

• YoY, CARLSBG registered marginally lower revenue of RM1166.9mn in 1HFY23, underpinned by a high base effect and shorter sales period during the Chinese New Year (CNY).

• QoQ, the group revenue declined by 23% to log at RM506.7mn, chiefly attributed to weaker consumer demand due to global economy uncertainties and the conclusion of the festive season. Nonetheless, its core earnings improved marginally by 4% to RM88.2mn, thanks to higher contributions from its associate in Sri Lanka.

• Geographically, Malaysia's operation's revenue was down by 4.8% YoY in 1HFY23 due to the early timing of CNY, while EBIT slid 9.4% YoY, underpinned by higher marketing costs. Likewise, Singapore's operation's revenue and EBIT declined 5.5% and 1.3% YoY, respectively, for the same reason. The associate in Sri Lanka contributed a higher profit of RM9.9mn in 1HFY23 due to the absence of a one-off tax expense of RM3.7mn.

• The board declared a second interim dividend of 22.0sen/share during the quarter under review (22.0sen/share in 1QFY22), bringing the YTD dividend to 43.0sen/share (1HFY22: 44.0sen/share).

Impact

• No changes to our earnings forecast.

Outlook

• The company reiterates its cautious view of the near-term outlook in view of the impact of inflation on consumer spending patterns. Nevertheless, we uphold an optimistic viewpoint regarding the endurance of demand. This positive perspective is rooted in the projected 2HCY23 economic resurgence after resolving uncertainties stemming from the 2023 state election. Furthermore, we expect the administration to introduce more stimulus measures poised to fortify the nation's economy more substantively and provide a robust trajectory.

Valuation

• In view of the recent weakness in share prices, we upgraded Carlsberg to BUY with an unchanged target price of RM23.00 based on DCF valuation (k: 7.8%, g: 3.0%).

Source: TA Research - 16 Aug 2023