Review

• As expected, Carlsberg reported stronger FY23 results. Net profit increased by 5.1% YoY to RM333.2mn, representing 103.4% and 99.7% of ours and consensus estimates, respectively.

• A final dividend of 31 sen (vs. 25 sen in 4Q22) was declared. This brings the total dividend for the FY23 to 93 sen (vs. 88 sen in FY22), translating to 85.3% payout ratio.

• FY23 net profit rose 5.1% YoY to RM333.2mn despite weaker revenue of RM2.3bn (-6.3% YoY). We attribute the better performance to: i) absence of prosperity tax of RM21.6mn and ii) deferred tax income of RM11.3mn. As such, FY23 tax rate declined 8.0 pts to 18.9%.

• Meanwhile, we gather that the dropped in sales was due to lower revenue in both Malaysia (-7.1% YoY) and Singapore (-4.3% YoY) as consumers pulled back on discretionary spending and shorter Chinese New Year (CNY) sales period in 2023.

• QoQ, 4Q23 net profit rose 10.6% to RM84.0mn, in tandem with higher revenue of 13.1% to RM580.5mn, thanks to year-end festive period and lower tax rate (-8.6 pts to 11.3%). Having said that, PBT remained flat (- 1.2% QoQ) due to the higher marketing cost (gear up for festive season and upcoming CNY).

Impact

• No change to our FY24-FY25 earnings assumptions.

Outlook

• We expect Carlsberg’s 1Q24 revenue to remain strong on the back of CNY sales. Thereafter, management expects an increase in SST to drive up costs, especially logistics costs. Note that food and beverages are exempted from the proposed SST hike to 8% from 6% currently.

• In all, we believe that PBT margin will decline in FY24 due to higher spending on advertisement and promotions (2024 Summer Olympic in Paris and EURO 2024 in Germany). In addition, the current inflationary pressures may snag economic growth and consumer sentiment.

Valuation

• We maintain Buy on Carlsberg with an unchanged target price of RM22.90/share based on DCF valuation (k: 7.8%, g: 3.0%).

Source: TA Research - 8 Feb 2024