KUALA LUMPUR: While coming as a surprise, Carlsberg Brewery (M) Bhd's decision to increase beer prices should be cushioned by an improving consumer outlook in Malaysia, said Hong Leong Investment Bank (HLIB) Research.
The research firm said that while the price hike may impact medium-term sales recovery, it does not expect any knee-jerk decline in sales volume, considering the improvement in labour conditions and income prospects, which will support demand for existing brands.
"It is worth noting that Malaysia’s 4Q23 consumer confidence index and business confidence index have rebounded from its lowest point in 3Q23.
"Companies express confidence in the outlook for the next three months, with particularly high optimism observed in the beverage and textile sectors," it said in a company update.
It was reported in a Chinese daily in March that both Carlsberg and rival Heineken Malaysia Bhd
will raise beer prices by about 5% starting April 1, 2024. The beer makers have since confirmed the news in separate announcements.
Meanwhile, HLIB is optimistic that Carlsberg's offering of Sapporo beer will fill the void left behind by the pulling of Asahi from shelves following the non-renewal of a distribution agreement with the latter beer brand.
The research firm highlighted that Asahi had a small market share of only 0.3% in Malaysia.
"With Sapporo beer already available in the on-trade channel, we anticipate that their sales will promptly make up for the gap left by Asahi," it said.
HLIB said Carlsberg's top line is expected to grow 5% year-on-year in FY24 with Sapporo sales replacing Asahi, although it said the initial marketing cost to promote the brand points to flat growth in its FY24 forecast.
With Carlsberg's share price correcting 23.6% from its post-pandemic peak of RM25, HLIB said most of the negatives have been priced in by the market.
"We highlight that the current share price is just 8% away from its 2020 trough (RM17.38). Notably, the operating profit or sentiment for Carlsberg is nowhere near the Covid-19 level – in fact, Carlsberg’s FY22-23 earnings are already above the pre-pandemic level," it said.
HLIB maintained "buy" on Carlsberg with a slightly lowered target price of RM30.12, from RM30.31 previously.
