Broker: UOB Kay Hian
Date of Report: Wednesday, 13 August 2025

Carlsberg Brewery Malaysia: 2Q25 Results, Price Hikes, and Outlook – Is Now the Time to Buy?

Executive Summary

Carlsberg Brewery Malaysia (CAB MK) released its 2Q25 earnings, revealing a performance slightly below analyst expectations. Despite soft consumer sentiment and ongoing challenges, especially in Singapore, the company remains resilient by announcing a price increase to help offset declining sales volumes. UOB Kay Hian maintains a BUY recommendation, albeit with a slightly reduced target price, citing strong dividend yields and long-term growth initiatives.

Company Overview

• Stock Name: Carlsberg Brewery Malaysia
• Share Price: RM17.28
• Target Price: RM23.30 (previous TP: RM24.90)
• Upside Potential: +34.8%
• Sector: Consumer Staples
• Market Cap: RM5,283.3m (US\$1,248.9m)
• Shares Issued: 305.7m
• Main Brands: Carlsberg, Kronenbourg, Somersby, Conor’s Stout Porter

Shareholder Structure and Price Performance

• Major Shareholders:
  • Carlsberg A/S: 51.0%
  • OCBC: 3.0%
  • AIA: 2.2%
• 52-Week High/Low: RM21.12 / RM17.24
• Year-to-Date Change: -16.4%

2Q25 Financial Results: Key Highlights

Carlsberg’s 1H25 results were marginally below expectations, largely due to persistent weak consumer demand and specific headwinds in the Singapore market.

Dividend and Earnings Performance

• Interim Dividend: 20 sen (unchanged YoY), total YTD dividend 43 sen (1H24: 42 sen)
• 1H25 Core Net Profit: RM177.0m (+5.8% YoY), representing 44% of UOBKH and 46% of consensus full-year forecasts
• Negative deviation: Weaker Singapore earnings, partly offset by lower tax and better contributions from Sri Lanka associate Lion Brewery (Ceylon)

Revenue and Volume Trends

• Sales Volume: Declined across all segments post-Chinese New Year (CNY), with mainstream and premium portfolios down 5% and 12% respectively in 1H25. The premium drop was mainly in Singapore.
• Malaysian Segment: Revenue fell to RM864.0m (-4.6% YoY), but operating profit rose to RM186.3m (+2.7% YoY) due to continued cost optimizations.
• Singapore Segment: Revenue dropped to RM289.0m (-11.9% YoY) and operating profit slumped to RM24.9m (-31.9% YoY) amid muted results for the Sapporo brand and softening on-trade channel footfalls.

Price Hike and Regulatory Risks

• Product Price Increase: Announced a single-digit price hike (expected 5-8%) on select products effective 1 September 2025 to protect margins amid weak consumer sentiment and margin pressures.
• Regulatory Concerns: Government plans to extend the pro-health tax (currently on sugary drinks) to alcohol and cigarettes as part of the 13th Malaysia Plan. Any excise increase could further depress sector sales volumes. The last excise duty hike was in 2016.

Earnings Revision and Valuation

• 2025/26/27 earnings cut by 6%/2%/1% respectively, reflecting lower sales volumes partially offset by price increases.
• Maintains BUY rating with a revised target price of RM23.30, based on a WACC of 7.8% and terminal growth of 3.0%.
• DCF-derived target implies 20.7x 2025F PE, 0.25 standard deviations below its five-year mean.
• Attractive dividend yields projected at 5.2–6.5% for 2025-2027.

Environmental, Social, and Governance (ESG) Initiatives

• Environmental:
  • 50% reduction in water usage at breweries by 2030
  • Zero carbon emissions and 100% renewable electricity at breweries by 2030
  • Zero coal usage at breweries
• Social:
  • 100% availability of alcohol-free brews
  • 100% responsible drinking messaging on packaging and brand activations
• Governance:
  • Board gender diversity: 71% male, 29% female
  • Management gender diversity: 67% female representation

Key Financial Tables

Profitability, Growth, and Leverage Metrics

• EBITDA Margin (%): 19.9 (2024), 20.4 (2025F), 21.9 (2026F), 23.4 (2027F)
• Net Margin (%): 14.2 (2024), 14.5 (2025F), 15.8 (2026F), 17.0 (2027F)
• ROE (%): 114.2 (2024), 111.4 (2025F), 119.1 (2026F), 125.1 (2027F)
• Debt to Equity (%): 27.7 (2024), 21.7 (2025F), 16.6 (2026F), 12.3 (2027F)

Outlook and Key Takeaways

• Carlsberg continues to face headwinds from weak consumer sentiment and competitive pressures in Singapore.
• The planned price increase aims to protect margins amid declining sales volume.
• Regulatory risks, particularly related to excise duties, remain a key concern for medium-term earnings visibility.
• Despite short-term challenges, Carlsberg offers attractive dividend yields and is advancing on key ESG initiatives.
• BUY rating reaffirmed with a revised target price, reflecting both near-term caution and long-term optimism.

Conclusion

Carlsberg Brewery Malaysia’s latest results may have missed expectations, but its decisive actions—including price increases and cost optimizations—demonstrate strong management discipline. With a robust dividend yield, improved ESG credentials, and a still attractive long-term valuation, the stock remains a compelling proposition for investors seeking both yield and growth potential in the consumer staples sector.