HLIB warns of rising regulatory risks for Carlsberg
The firm expects rising regulatory risks in the sin sectors given the government's push for a pro-health tax on brewers and its support for a potential tax hike on cigarettes.
To reflect this risk, the firm has adopted a more conservative valuation approach for Carlsberg.
It pegged the brewer's price-to-earnings ratio at 0.5 standard deviation below its five-year historical average, resulting in a lower target price based on a multiple of 20 times its mid-FY26 forecast earnings.
HLIB kept its "Buy" call on Carlsberg with a target price of RM24.14, down from RM31.08 previously.
However, HLIB continues to favour Carlsberg for its undemanding valuation and its more diversified sales channels, which provide a natural hedge against exchange rate fluctuations and lower exposure to regulatory risks.
The firm also expects the company's beer price hikes to have minimal impact on demand, with any slight volume declines likely offset by higher selling prices and potential margin gains from a stronger ringgit.
"Looking at the past two rounds of price hikes in August 2023 and April 2024, the financial impact on brewers has been more neutral than negative, with both recording flat or slight increases in bottom-line performances despite lower sales volumes.
"This resilience is largely driven by the inelastic demand for beer. As such, we do not expect a significant drop in performance post-hike.
"Additionally, brewers may benefit from margin improvements supported by the strengthening ringgit against the US dollar," the firm added.
On Carlsberg's recent earnings results, HLIB said the company's core profit after tax and minority interests (PATAMI) was RM174 million for the first half of 2025, representing a 2.0 per cent increase from last year.
This result was broadly in line with expectations, achieving 48 per cent of the firm's full-year forecast and 47 per cent of consensus estimates.
"The group's performance was weighed down by softer sales in Singapore, attributed to weak consumer sentiment and heightened pricing competition from other brewers.
"Separately, management announced a single-digit price increase for its Malaysia products to support sustainable margins, amid a volatile operating environment," HLIB said.
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