Carlsberg Emerges as the Top Performer, Despite Falling short of FY23 Expectations

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Carlsberg Brewery Malaysia Bhd’s stock emerged as the top gainer in morning trade today, despite an analyst noting that it fell short of earnings expectations for the financial year 2023. Trading at RM19.78 a share earlier, it saw a rise of 34 sen, or 1.75 percent. According to RHB research, Carlsberg’s FY23 results failed to meet expectations due to weaker-than-anticipated profit margins. The company’s net profit of RM319 million represented 95 percent and 96 percent of the firm’s and Street’s estimates, respectively.

However, RHB research anticipates the company’s top line to expand in 2024, propelled by the relatively inelastic demand for beer and a healthy legal total industry volume (TIV). “We continue to favor the brewery sector due to the consistent demand for beer and ongoing operational efficiency improvements to counteract cost inflation,” stated RHB research. The firm maintained its “Buy” rating on Carlsberg, with a new target price of RM22.20, down from RM22.70. The research house also noted that the premiumization strategy will persist, driving a favorable average selling price (ASP) and targeting higher-income groups that are more resilient to inflationary pressures.

“In light of the impending implementation of subsidy rationalization and increased consumption taxes, which are expected to affect consumption, we anticipate Carlsberg‘s top-line growth to remain robust,” stated RHB research in a note. Additionally, RHB research highlighted the company’s plans to enhance its production facilities further to enhance operational efficiency. This strategy is expected to effectively counteract any input cost inflation resulting from unfavorable foreign exchange rates and the increase in service tax. Management anticipates stable commodity prices, which will support this initiative.

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