Heineken Malaysia to drive efficiency after strong start

KUALA LUMPUR: Analysts say Heineken Malaysia Bhd’s sales volume in the coming quarter could be impacted by the absence of pre-price hike boosts that drove demand higher in 1QFY24.

Heineken yesterday announced a strong start to the year with 1Q net profit growth of 11.4% year-on-year to RM122.48mil on the back of 6.61% higher revenue of RM789.17mil.

According to analyst reviews, the brewer’s sales volume, which recorded mid-single-digit growth, was underpinned by higher demand for Tiger and Heineken beers on the back of a successful Chinese New Year marketing campaign, improved cost management and customers stocking up on beer ahead of a price hike.

Hong Leong Investment Bank (HLIB) Research cautioned in its outlook that the absence of such pre-hike boosts may result in a comparatively weaker performance in the upcoming quarter.

Similarly, RHB Research said there could be a drop off in sales owing to a temporary boost to the performance in 1Q24.

“As we understand that there was a price increase effective April, volume may see adjustments in 2Q24F assuming pre-price increase frontloading has boosted 1Q24 numbers,” it said in a results review.

However, RHB expects the company to remain focused on enhancing its premium portfolio and driving operation efficiency.

“We believe these are effective measures to mitigate the soft market environment where consumer sentiment is cautious on the back of inflationary pressures.”

It added that downside to consumption will likely be cushioned by the less elastic demand for beer and effective clampdown on contrabands.

In addition, it expects the recovery in tourist arrivals to bode well for brewery players.

HLIB, meanwhile, said it does not expect a knee-jerk decline in beer sales despite the recent price hike as it expects a gradual improvement in labour market conditions and income prospects, which should support domestic demand.

Another research house, TA Securities Research, anticipates that the brewer’s share price will benefit from tourist arrivals and the increase in out-of-home beer consumption with the reopening of bars and restaurants.

It said, however, that major sports events will have an insignificant impact on brewers.

TA Securities maintained “buy” on Heineken while hiking its target price to RM29.20, from RM28.60 previously.

RHB also kept “buy” on the stock with an unchanged target price of RM29.60.

HLIB reiterated “buy” and raised its target price to RM30.71 from RM29.94.