KUALA LUMPUR (Feb 8): Despite the absence of the Asahi brand, analysts anticipate an uptick in sales volume for Carlsberg Brewery Malaysia Bhd from its existing brands, fuelled by an influx of foreign tourists to Malaysia and Singapore, coupled with a gradual improvement in labour market conditions and income prospects in the country. 

In a note on Thursday, Hong Leong Investment Bank (HLIB) Bhd said the earnings impact resulting from the delisting of Asahi will begin to manifest in the upcoming quarters, with Carlsberg estimating a net profit reduction of approximately RM30 million for the financial year ending Dec 31, 2024 (FY2024). 

“However, we anticipate that this impact will be cushioned by the introduction of Sapporo premium beer, which is brewed locally and is now available in the market. Despite the absence of sales volume from the Asahi brand, we expect lower sales to be cushioned by the continued influx of foreign tourists to Malaysia and Singapore and the anticipation of gradual improvement in labour market conditions and income prospects in Malaysia, which will support the demand for existing brands. 

“Additionally, lower raw material costs and the expected strengthening of the ringgit against the US dollar are poised to further support the group's earnings performance for FY2024,” said the research house, which maintained its "buy" call with an unchanged target price (TP) of RM30.31. 

Carlsberg was Bursa Malaysia's top gainer in early trade on Thursday. The counter climbed 36 sen or 1.85% to RM19.80 at the time of writing, giving it a market capitalisation of RM6.05 billion. In the past year, the counter has declined by more than 19%. 

While the upcoming implementation of subsidy rationalisation and higher consumption taxes should impact consumption, RHB Research expects Carlsberg’s topline growth to be sustained by the relatively inelastic demand for beer and healthy legal total industry volume. 

In addition, Carlsberg's premiumisation strategy will continue to drive favourable average selling prices and target higher income groups that are more insulated from inflationary pressures, HLIB said in a separate note. 

“We continue to like the brewery sector for the steady demand for beer and continuous operational efficiency gains to mitigate cost inflation. We believe the current valuation at -1.5SD is unwarranted considering the muted regulatory risks, with political stability and the largely contained contrabands market,” said RHB. 

Meanwhile, the group’s plans to further upgrade production facilities to drive operational efficiency will be effective in mitigating any input cost inflation arising from unfavourable FX and hike in service tax, with management expecting commodity prices to stay stable, said the research house. 

TA Securities Holdings Bhd, on the other hand, sees Carlsberg’s profit before tax margin declining in FY2024 due to higher spending on advertisement and promotions due to the 2024 Summer Olympic in Paris and Euro 2024 in Germany. 

“In addition, the current inflationary pressures may snag economic growth and consumer sentiment,” it said. 

HLIB, RHB and TA Securities maintained their "buy" calls for Carlsberg. HLIB maintained its target price (TP) at RM30.31 while RHB adjusted its TP downward from RM22.70 to RM22.20. TA Securities retained its TP at RM22.90.