In a note, the research house said the group's premium brands saw volume growth of 18% in FY18 versus mainstream brands' growth of 12%.
"Albeit selling at lower volumes, the encouraging growth level is also on the back of higher selling prices, which fetch a higher profit.
"That said, we believe that premiumization may be the key drivers for both Malaysia and Singapore operations going forward, as the group continues to gain footing with its premium offerings, by tapping on the growing trends, hosting sampling events as well as targeted marketing to specific demographics," it said.
Kenanga added that the government has intensified efforts to clamp down on contraband beer, which takes up 20-25% of West Malaysia's market share.
It believes consumer may return to the legal market given the growing awareness of the risks in consuming illegal alcoholic beverages as well as the increased number of raids by the authorities.
The reintroduction of the Sales and Service Tax in September 2018 and cost-pass through in April 2019 is expected to have little impact on consumer demand given the market's inelastic nature.
The research house also expects a further excise tax to be unlikely given the authorities attempt to stamp out the illicit trade of alcohol.
The Singapore market, however, will remain challenging due to the introduction of the EUroean Free Trade Agreement earliest in 4Q19, which could shift demand towards cheaper imports from Europe and threaten the group's market share of about 30%.
Kenanga maintained market perform on Carlsberg with a higher target price of RM23.95 from RM23 previously.
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