Review

• Heineken Malaysia Berhad (Heineken)’s 1QFY24 core earnings of RM122.5mn (+11.4% YoY) came in above ours and consensus’ full-year estimate. We believe the deviation could be attributed to rush trade purchases before the price adjustment, effective 1 April 2024.

• 1QFY24 revenue is up 6.6% YoY to RM789.2mn, driven by effective Chinese New Year sales and strategic commercial initiatives.

• Sequentially, 1QFY24 PBT hiked QoQ by 22.2%, underpinned by a revenue rise of 8.3%. The increase was mainly due to effective marketing campaigns that elevated Chinese New Year sales.

• No dividend was declared for the quarter under review.

Impact

• We raised our earnings forecast by 3.1%/0.3%/0.1% for FY24/25/26, respectively, after inputting the 2023 Annual Report’s figures and factoring in the recent beer price hike.

Outlook

• Despite commendable 1QFY24 performance, management remains cautiously optimistic about its outlook in FY24 due to the ongoing challenging macroeconomic conditions.

• However, we expect the group’s profitability to remain robust, supported by an enhanced EBIT margin of 21.0% recorded in 1QFY24 (vs. 19.8% in 1QFY23).

• We anticipate that the share price will benefit from improvements in tourist arrivals and increased out-of-home beer consumption with the reopening of bars and restaurants.

• Meanwhile, we believe that major sports events will have an insignificant impact on brewery players. (please refer to our sector reports dated 9 May 2024 for more details)

Valuation

• Reiterate Buy on Heineken with a revised target price of RM29.20/share (previously: RM28.60) post the earnings adjustment and rolling forward our DCF valuation (k: 7.7%, g: 3.0%).

Source: TA Research - 15 May 2024