RHB Research expects the brewery's financial momentum to continue into 2H24, supported by encouraging tourist arrivals, the strengthening ringgit and recent price increases.
PETALING JAYA: Heineken Malaysia Bhd
is expected to sustain a strong performance going into the latter half of the year, despite a price hike in April, thanks to steady demand for beer and other favourable factors.
RHB Research said the brewery’s first half of financial year 2024 (1H24) results met its expectations but outperformed the street’s.
The research outfit maintained a “buy” rating with a target price (TP) of RM29.60, representing a 35% upside from the current level.
“Demand stickiness, rising tourist arrivals and price increases should sustain earnings momentum going forward, on top of the strengthening ringgit and continued clampdown on the illicit trade,” RHB Research noted.
It further emphasised that beer consumption has held up well despite cautious consumer sentiment impacted by elevated inflationary pressures, thanks to the relatively inelastic demand and engaging marketing initiatives.
The research outfit expects this momentum to continue into 2H24, supported by encouraging tourist arrivals, the strengthening ringgit and recent price increases.
It does not expect an excise duty hike in the foreseeable future, considering the potential threat of rising illicit trade.
“The current valuation looks undemanding at minus 1.5 standard deviation over the five-year mean considering the solid earnings delivery, notwithstanding the subdued consumer sentiment, diminished regulatory risks with political stability and generous dividend payout.”
Similarly, Hong Leong Investment Bank Research (HLIB Research) maintained a “buy” rating with an unchanged TP of RM30.71 per share.
It said Heineken’s 1H24 core net profit of RM213.6mil met its expectations, accounting for 53% of full-year forecasts.
“Notably, Heineken recorded low single-digit growth in beer sales volume year-to-date, which is in line with our narrative of a recovery in sales volume,” it noted.
HLIB Research anticipates this trend to continue into 2H24, supported by a gradual improvement in labour market conditions and a continued influx of tourist arrivals.
Additionally, the appreciation of the ringgit against the US dollar should help alleviate Heineken’s cost pressures, it noted.
Meanwhile, TA Research reiterated a “buy” rating on Heineken with a new TP of RM28.02 per share.
The research outfit noted that Heineken implemented a price adjustment for selected products in April 2024 to address higher input costs.
Despite this, TA Research expects consumer demand to remain resilient.
“Overall, we believe that the 2H24 performance will remain robust, supported by higher on-trade sales, price revisions and increased international tourist arrivals,” it added.
