CARLSBG: Cost Efficiencies Drive Strong Earnings Performance, Positive Outlook Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that a major brewery’s core net profit for FY25 surpassed expectations, largely attributed to robust cost management strategies despite a decline in overall revenue. The company recorded a core net profit of RM373.2 million, exceeding both the firm’s full-year forecast by 5% and consensus estimates by 4%.
Performance Review
Despite a 4.9% year-on-year (YoY) reduction in revenue to RM2.3 billion, core earnings for FY25 surged by 13.0% YoY. This improvement was primarily driven by strategic price increases, tightened cost controls, one-off trade offer adjustments from Singaporean operations, and a favorable decrease in the effective tax rate to 22.0% (down from 24.0% in FY24).
In Malaysia, 4QFY25 EBIT demonstrated a 22.8% YoY increase to RM95.8 million, bolstered by higher average selling prices (ASPs) and a 16% YoY reduction in operating expenses. However, Malaysian revenue declined 6.8% YoY to RM404.1 million, impacted by a later Chinese New Year timing in 2026 and reduced distributor stocking. Cumulatively, full-year Malaysian EBIT grew 8.5% YoY to RM380.2 million, with revenue marginally down 3.0% YoY to RM1.7 billion.
Singaporean operations also saw a significant 25.4% YoY rise in 4QFY25 EBIT to RM17.2 million, supported by one-off trade offer adjustments. These adjustments helped mitigate the effects of weaker demand and the depreciation of the Singapore dollar (SGD). For the full FY25, Singaporean EBIT increased 6.0% YoY to RM69.6 million, though revenue declined 10.2% YoY to RM560.4 million.
The company also announced a final dividend of 43.0 sen per share in 4QFY25, bringing the cumulative dividend for FY25 to RM1.11 per share, an increase from RM1.00 per share in FY24.
Future Outlook
Looking ahead to 1QFY26, analysts anticipate stronger festive demand during the Chinese New Year period and the positive impact of recent domestic price adjustments to support revenue growth. However, potential foreign exchange translation headwinds from Singaporean operations, particularly if the SGD continues to weaken against the Ringgit, could partially offset these gains.
The group remains committed to product innovation as a key driver for topline growth. For instance, the launch of Somersby Shandy in November 2025 aims to capture demand for fruity, low-alcohol beverages. Following the strong FY25 performance, analysts have slightly revised their FY26 and FY27 earnings forecasts higher by 1.7% and 1.0%, respectively, and introduced a FY28 core net profit forecast of RM418.8 million.
Valuation and Recommendation
The investment bank maintains a BUY recommendation on the stock. Following earnings revisions and the roll-forward of the valuation base year to CY27, a higher target price of RM21.90 per share (previously RM20.50 per share) has been derived, based on a Discounted Cash Flow (DCF) valuation.
