Carlsberg's prospects for 2H recovery remain intact

KUALA LUMPUR: Carlsberg Bewery Malaysia Bhd's prospects of an earnings recovery remains on track in anticipation of a full-blown roll-out of the vaccination programme in the second half of the year.

Following the brewer's latest earnings results, Kenanga Research said it expects the near-term weakness resulting from softer beer demand to be partially alleviated by a sturdier Singapore operation due to the improving Covid situation there.

"After rolling over valuation base to FY22E, we revised down our TP to RM24.10 applying a lower PER of 25.0x (implying 0.5SD below mean) to reflect the resurgence of near term head-winds.

"Reiterate OUTPERFORM given the track record of inelastic beer demand and expected earnings recovery on full-blown vaccination roll-out in 2H 2021," it said in a note.

For the first quarter of the year, Carlsberg's core net profit of RM66mil came within Kenanga's and consensus expectations at 25% and 26% of full-year estimates.

While Malaysian operations recorded a 20% drop in revenue, Singapore operation's revenue rebounded 21% to RM175mil on account of the Chinese New Year celebrations and the easing of restrictions from Dec 28, 2020.

The research house maintained its earnings forecasts given the in-line results.

"While earnings will be challenging in the 2Q, we are positive of better performance in the subsequent quarters premised on an earnings recovery with the vaccine roll-out coupled with its pe-Covid track record of inelastic beer demand," said Kenanga.
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