Review

• Carlsberg Brewery Malaysia Berhad’s (Carlsberg) reported a 2QFY24 core net profit of RM79.4mn, accounting for 50% of our and consensus’ full year estimates.

• Despite flat 2QFY24 revenue of RM507.5mn, core net profit fell by 10.0% YoY. The weaker quarterly performance was mainly due to higher marketing expenses and increased inflationary costs in both Malaysia and Singapore.

• Cumulatively, 1HFY24 revenue rose by 5.7% YoY to RM1.2bn, driven by longer CNY sales compared to 1HFY23.

• However, core net profit declined by 3.4% YoY to RM167.3mn. This decrease was largely due to a higher deferred tax expense in 1HFY24 (+121.5% YoY to RM14.3mn) for its Sri Lankan associate, which offset the improved business performance (+59.4% YoY to RM15.8mn).

• The board declared a second interim dividend of 20.0sen/share (vs. 22.0sen/share in 2QFY23) for the quarter under review. This brings the YTD dividend to 42.0sen/share, which is lower than the 43.0sen/share declared in 1HFY23.

Impact

• No change to our earnings estimates.

Outlook

• Management believes that the near-term outlook will remain cautious due to the impact of inflation on consumer spending power. We anticipate that sales volume will be under pressure, even though revenue growth is expected to be driven by a price revision effective in April 2024.

• However, we expect on-trade sales to improve gradually in the future, driven by increased outbound tourism and government initiatives to boost tourism in Malaysia, such as a 30-day visa-free period for foreign visitors.

Valuation

• Maintain our Buy recommendation on Carlsberg with a revised target price of RM24.10/share, after incorporating a 3% premium to account for the 4-star ESG initiative (k: 8.1%, g: 3.0%).

Source: TA Research - 20 Aug 2024