Resilience of beer sales to elevate Carlsberg

PETALING JAYA: Carlsberg Brewery (M) Bhd is expected to enjoy sustained demand for beer, driven by the resurgence in tourist arrivals and the anticipated seasonal trends in the latter half of the year (2H23).

Hong Leong Investment Bank (HLIB) Research noted the projection is guided by the Malaysian and Singapore authorities’ expectations of a 60% and 90% to 121% year-on-year surge in 2023 foreign tourist arrivals, respectively.

“Although Carlsberg has encountered challenges due to weak consumer sentiment impacting sales, we anticipate the resilience of beer sales will remain, bolstered by the ongoing recovery in tourist arrivals and 2H23 seasonal trends,” it added.

The research outfit anticipates the reduced costs of tin and barley will result in a more positive margin outlook for brewers as fixed-price contracts are renewed.

“If the trend of diminishing raw material costs persists, there exists a possibility for margins to expand as brewers have previously adjusted beer prices in response to cost pressures between the 2021 and 2022 period,” HLIB Research said.

The research firm noted Carlsberg has revealed intentions to introduce a new premium brand in the coming months as its exclusive distribution rights for the Asahi brand in Malaysia is set to expire on Dec 31, 2023.

Meanwhile, TA Research maintained an optimistic outlook on Carlsberg on the sustained demand for the brewery’s products.

“This positive perspective is rooted in the projected 2H23 economic resurgence after resolving uncertainties stemming from the 2023 state election,” it explained.

TA Research added Carlsberg reaffirms its cautious perspective on the near-term forecast, considering the influence of inflation on consumer spending behaviours.

“We expect the administration to introduce more stimulus measures poised to fortify the nation’s economy more substantively and provide a robust trajectory,” it noted.

In view of the recent weakness in share prices, TA Research has upgraded Carlsberg to a “buy” with an unchanged target price (TP) of RM23 per share.

Similarly, HLIB Research suggested there could also be more upside potential in Carlsberg following the recent fall in its share price.

HLIB Research said investors appear to undervalue Carlsberg’s Singapore operations, which brings several advantages such as sales diversification, a natural hedge against exchange rate fluctuations, reduced regulatory risk and a brighter sales outlook fuelled by robust purchasing power.

“Carlsberg’s operations in Singapore provide enhanced exposure to the reopening of the tourism sector,” it said.

The research outfit maintained its “buy” call on Carlsberg with an unchanged TP of RM30.77 a share.