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Carlsberg Brewery: Margin Expansion Mitigates Topline Softness

Carlsberg Brewery (CAB MK): Margin Expansion Mitigates Topline Softness

13 August 2025

Malaysia Results Review

Consumer Non-cyclical | Food & Beverage Products

Maintain BUY and MYR22.50 TP, 30% upside and 7% FY26F yield. 1H25 results broadly met expectations on solid profit margins and operational efficiencies. We believe the recent stock sell-down is unwarranted and current valuation is compelling, considering the earnings resiliency and generous dividend payout – notwithstanding the cautious consumer sentiment and rising cost environment. This is sustainable on demand stickiness, margins uplift brought about by a premiumised product mix, and price increases, as well as encouraging tourist arrivals.
1H25 results are broadly within expectations. Core earnings of MYR177m (-1% YoY) accounted for 47-48% of our and consensus forecasts, but we expect bottomline to catch up in 2H25 – driven by margins expansion on another round of price increases and easing input costs. Post results, we make no changes to our earnings forecasts and DDM-derived MYR22.50 TP (inclusive of a 6% ESG premium given Carlsberg Brewery’s 3.3 score vs the 3.0 country median). The TP implies 18x P/E FY26F – on par with the stock’s 5-year mean and at a discount to close peer Heineken Malaysia (HEIM MK, BUY, TP: MYR31.3), in view of the latter’s market leadership here.
Results review. YoY, 1H25 revenue dipped 7% to MYR1.2bn as the earlier timing of the Lunar New Year in 2025 frontloaded some of the festive sales into 4Q24, Meanwhile, the Singapore market (-12% YoY) continued to face intense competition. That said, 1H25 operating margin expanded by 0.7ppts, driven by better operational efficiency and price increases. This, coupled with a robust growth of Carlsberg’s Sri Lankan associate, mitigated the topline softness. QoQ, 2Q25 revenue and net profit fell 26% and 13% on unfavourable seasonality, but offset by a lower marketing spend. 1H25 DPS totalled at 43 sen, slightly higher than 1H24’s 42 sen.
Outlook. Carlsberg is raising its product prices by single-digit percentage effective Sep 2025. Whilst this is likely to dampen demand in the immediate term, in our view, management is confident that volume will eventually normalise. The move should lift profit margins, further aided by the current favourable FX and input cost trends. Meanwhile, consumer sentiment has remained subdued, according to management’s observation. Hence it will be focused on marketing engagements and product innovation to drive brand premiumisation in order to sustain earnings growth. On the other hand, the strong tourist arrivals (5M25: +20%) may lend support to beer consumption, and the momentum could accelerate ahead, spurred by Visit Malaysia 2026.
Downside risks to our recommendation include unfavourable regulatory changes and a major loss of market share.

Buy (Maintained)

Target Price (Return): MYR22.50 (30.2%)

Price (Market Cap): MYR17.30 (USD1,249m)

ESG score: 3.3 (out of 4)

Avg Daily Turnover (MYR/USD): 1.76m/0.41m

Analyst

Soong Wei Siang

+603 2302 8130

soong.wei.siang@rhbgroup.com

Share Performance (%)

	YTD	1m	3m	6m	12m
Absolute	(16.4)	(8.9)	(10.2)	(14.7)	(6.1)
Relative	(11.9)	(11.0)	(11.6)	(12.5)	(3.7)
52-wk Price low/high (MYR)	17.2 – 21.1

Forecasts and Valuation

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Total turnover (MYRm)	2,261	2,376	2,515	2,604	2,696
Recurring net profit (MYRm)	322	348	373	388	403
Recurring net profit growth (%)	(2.5)	8.2	7.1	4.1	3.8
Recurring P/E (x)	16.37	15.13	14.13	13.57	13.07
P/B (x)	22.4	18.9	18.7	18.4	18.2
P/CF (x)	16.17	14.52	13.75	11.55	11.13
Dividend Yield (%)	5.4	5.8	7.0	7.3	7.6
EV/EBITDA (x)	11.49	10.84	9.82	9.47	9.13
Return on average equity (%)	174.2	131.4	133.2	136.8	140.1
Net debt to equity (%)	10.1	net cash	15.2	13.6	11.3

Overall ESG Score: 3.3 (out of 4)

E Score: 3.3 (EXCELLENT)

S Score: 3.3 (EXCELLENT)

G Score: 3.0 (GOOD)

Please refer to the ESG analysis on the next page

Emissions And ESG

Trend analysis

Recorded an YoY overall increase in FY24 in tandem with the growing sales and started tracking Scope 3 emissions.

Emissions (tCO2e)	Dec-22	Dec-23	Dec-24	Dec-25
Scope 1	4,784	4,354	4,389	na
Scope 2	9,768	9,428	9,691	na
Scope 3	–	–	1,825	na
Total emissions	14,552	13,782	15,905	na

Source: Company data, RHB

Latest ESG-Related Developments

Increased the recycled content in bottles and cans significantly. Reduced water used per hl of beer produced and total water usage in brewery by 12%.

10,635 (FY23: 7,490) consumers reached on responsible drinking awareness.

More than MYR19m raised via Top Ten Charity Campaign for 12 beneficiaries in Malaysia.

ESG Unbundled

Overall ESG Score: 3.3 (out of 4)
Last Updated: 29 May 2025

E Score: 3.3 (EXCELLENT)
Carlsberg continues to contribute to environmental sustainability by implementing a few initiatives such as Zero Carbon Footprint and Zero Water Waste whilst also shifting its reliance to renewable energy. It has a Reduce, Reuse, Recycle & Rethink programme to minimise waste.

S Score: 3.3 (EXCELLENT)
Increased the recycled content in bottles and cans significantly. Reduced water used per hl of beer produced and total water usage in brewery by 12%. 10,635 (FY23: 7,490) consumers reached on responsible drinking awareness. More than MYR19m raised via Top Ten Charity Campaign for 12 beneficiaries in Malaysia.

G Score: 3.0 (GOOD)
Carlsberg has applied and adopted the majority of the best practices of the Malaysian Code on Corporate Governance.

ESG Rating History

Date	Rating
Aug-23	3.3
Oct-23	3.3
Dec-23	3.3
Feb-24	3..3
Apr-24	3.3
Jun-24	3.3
Aug-24	3.3
Oct-24	3.3
Dec-24	3.3
Feb-25	3.3
Apr-25	3.3
Jun-25	3.3
Aug-25	3.3

Source: RHB

Financial Exhibits

Financial summary (MYR)

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Recurring EPS	1.06	1.14	1.22	1.27	1.32
DPS	0.93	1.00	1.21	1.26	1.31
BVPS	0.77	0.91	0.92	0.94	0.95
Return on average equity (%)	174.2	131.4	133.2	136.8	140.1

Valuation metrics

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Recurring P/E (x)	16.37	15.13	14.13	13.57	13.07
P/B (x)	22.4	18.9	18.7	18.4	18.2
FCF Yield (%)	5.2	5.0	6.1	7.5	7.8
Dividend Yield (%)	5.4	5.8	7.0	7.3	7.6
EV/EBITDA (x)	11.49	10.84	9.82	9.47	9.13
EV/EBIT (x)	13.29	12.67	11.44	11.04	10.67

Income statement (MYRm)

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Total turnover	2,261	2,376	2,515	2,604	2,696
Gross profit	781	834	923	963	1,005
EBITDA	461	486	543	564	586
Depreciation and amortisation	(62)	(70)	(77)	(81)	(84)
Operating profit	399	416	466	484	502
Net interest	(5)	(3)	(7)	(9)	(9)
Pre-tax profit	420	448	497	514	534
Taxation	(80)	(108)	(112)	(113)	(117)
Reported net profit	333	337	373	388	403
Recurring net profit	322	348	373	388	403

Cash flow (MYRm)

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Change in working capital	(27)	70	(48)	5	5
Cash flow from operations	326	363	383	456	474
Capex	(54)	(102)	(60)	(60)	(60)
Cash flow from investing activities	(38)	(86)	(60)	(60)	(60)
Cash flow from financing activities	(289)	(282)	(303)	(394)	(408)
Cash at beginning of period	91	95	85	105	108
Net change in cash	(1)	(5)	20	3	5
Ending balance cash	90	90	105	108	113

Balance sheet (MYRm)

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Total cash and equivalents	95	85	105	108	113
Tangible fixed assets	322	374	357	336	312
Total assets	1,020	1,133	1,204	1,244	1,287
Short-term debt	117	77	150	150	150
Total long-term debt	2	0	0	0	0
Total liabilities	779	850	904	929	954
Total equity	240	283	299	316	333
Total liabilities & equity	1,020	1,133	1,204	1,244	1,287

Key metrics

	Dec-23	Dec-24	Dec-25F	Dec-26F	Dec-27F
Revenue growth (%)	(6.3)	5.1	5.8	3.5	3.5
Recurrent EPS growth (%)	(2.5)	8.2	7.1	4.1	3.8
Gross margin (%)	34.5	35.1	36.7	37.0	37.3
Operating EBITDA margin (%)	20.4	20.5	21.6	21.7	21.7
Net profit margin (%)	14.7	14.2	14.8	14.9	15.0
Dividend payout ratio (%)	85.1	90.5	99.0	99.0	99.0
Capex/sales (%)	2.4	4.3	2.4	2.3	2.2
Interest cover (x)	69.2	101.1	55.0	43.2	44.8

Results At a Glance

Carlsberg’s quarterly results review

FYE Dec (MYRm)	2Q24	1Q25	2Q25	QoQ (%)	YoY (%)	1H24	1H25	YoY (%)	Comments
Revenue	507.5	662.8	490.2	(26.0)	(3.4)	1,233.2	1,153.0	(6.5)	YTD decline due to earlier timing of Lunar New Year and persistent Singapore market weakness.
EBIT	97.5	116.7	95.2	(18.4)	(2.3)	218.6	211.9	(3.1)	Healthy margin expansion supported by ASP increase.
EBIT margin (%)	19.2	17.6	19.4	1.8	0.2	17.7	18.4	0.7	Healthy margin expansion supported by ASP increase.
Interest expense	(0.6)	(1.1)	(0.4)			(2.0)	(1.5)
Interest income	0.3	0.3	0.5			0.4	0.7
Other operating income	0.5	0.9	4.0			1.8	4.9
Share of associate profits	8.3	6.8	9.1			15.8	15.9
EI	(0.4)	0.0	0.0			(11.2)	0.0
Pre-tax profit	105.4	122.6	104.4	(14.8)	(0.9)	232.8	227.0	(2.5)
Pre-tax margin (%)	20.8	18.5	21.3	2.8	0.5	18.9	19.7	0.8
Tax	(25.0)	(27.8)	(22.2)	(20.0)	(11.2)	(63.9)	(50.0)	(21.7)
Effective tax rate (%)	23.7	22.7	21.3	(1.4)	(2.5)	27.4	22.0	(5.4)
Minority interest	(1.0)	(0.3)	(0.3)			(1.6)	(0.5)
Net profit	79.4	94.5	81.9	(13.3)	3.2	167.3	176.5	5.4
Core profit	79.8	94.5	81.9	(13.3)	2.7	178.5	176.5	(1.2)	At 47-48% of forecasts.
Net margin (%)	15.7	14.3	16.7	2.5	1.0	14.5	15.3	0.8	1H25 DPS amounted to 43 sen (1H24: 42 sen).
Breakdown by region
Revenue
Malaysia	363.9	494.6	369.4	(25.3)	1.5	905.2	864.0	(4.6)
Singapore	143.6	168.2	120.8	(28.2)	(15.9)	328.0	289.0	(11.9)	Impacted by intense competition.
Total	507.5	662.8	490.2	(26.0)	(3.4)	1,233.2	1,153.0	(6.5)
Operating profit
Malaysia	76.9	105.6	80.7	(23.6)	4.9	181.4	186.3	2.7
Singapore	20.4	10.4	14.6	40.2	(28.5)	36.6	24.9	(31.9)
Total	97.5	116.7	95.2	(18.4)	(2.3)	218.6	211.9	(3.0)
Operating margin (%)
Malaysia	21.1	21.4	21.8	0.5	0.7	20.0	21.6	1.5
Singapore	14.2	6.2	12.0	5.9	(2.1)	11.2	8.6	(2.5)
Total	19.2	17.6	19.4	1.8	0.2	17.7	18.4	0.7

Source: Company data, RHB

Recommendation Chart

Date	Recommendation	Target Price	Price
2025-05-29	Buy	22.5	19.6
2025-02-13	Buy	22.5	20.1
2024-11-11	Buy	23.1	20.0
2024-08-20	Buy	22.2	19.2
2024-05-13	Buy	22.2	19.4
2024-02-08	Buy	22.2	19.7
2023-11-01	Buy	22.7	19.8
2023-05-10	Neutral	22.7	21.6
2023-02-24	Neutral	25.0	23.0
2022-11-13	Neutral	25.7	23.4
2022-08-22	Neutral	25.1	24.0
2022-05-24	Neutral	23.8	22.1
2022-02-17	Neutral	23.8	22.3
2021-11-14	Buy	24.6	21.6
2021-10-13	Neutral	23.1	22.5

Source: RHB, Bloomberg

RHB Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months

Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain

Neutral: Share price may fall within the range of +/- 10% over the next 12 months

Take Profit: Target price has been attained. Look to accumulate at lower levels

Sell: Share price may fall by more than 10% over the next 12 months

Not Rated: Stock is not within regular research coverage

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