Carlsberg, a Danish multinational brewer, said its business in China rebounded strongly and western European region saw an improved demand towards the end of the second quarter due to the gradual reopening of the on-trade channel and subsequent restocking in many markets, sending its shares up nearly 6%.
The world’s third-biggest brewer after Anheuser Busch InBev and Heineken said it anticipates operating profit to decline 8.9%, total volumes to fall by 7.7% and revenue to dip 11.6% in the first half of this year.
Carlsberg shares gained over 40% since March’s trough and were trading 5.37% higher at the time of writing. The full interim financial statement for H1 2020 will be published on August 13, 2020.
In Asia, Carlsberg’s Chinese business rebounded strongly in the second quarter, and profits improved significantly, driven by cost reductions as many marketing activities were postponed until the second half of this year. Sales in other Asian markets were significantly impacted by the lockdowns, especially the businesses in India and Nepal.
Carlsberg stock forecast and price target
Morgan Stanley target price is Danish Krone 955.00 with a high of DKK 1,100 under a bull scenario and DKK 575 under the worst-case scenario. UBS raised the target price to DKK 720 from DKK 660; Berenberg cuts target price to DKK 1,010 from DKK 1,032.
Barclays raised target price to DKK 988 from DKK 923; Jefferies raised price target to DKK 1,000 from DKK 950 and JP Morgan raised to overweight from neutral, raising the target price to DKK 1,050 from DKK 825. We expect it is good to buy as 50-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity with a target of DKK 1,000.
“Carlsberg is our top pick with more resilient earnings than peers due to (1) geographic mix – its lack of exposure to Americas/Africa and presence in China may speed up top-line recovery, while limited overlap with ABI means it should avoid the worst of the competitive pressures; (2) cost focus – it should be better able to offset top-line headwinds than peers, thanks to its cost management focus, and deliver margin upside in the longer term; (2) low leverage at <2x net debt/EBITDA affords more balance sheet flexibility compared to highly levered peers. The stock is trading at a discount to EU Bevs peers, which we consider unwarranted,” Pinar Ergun, equity analyst at Morgan Stanley noted.
“We forecast an -11% OSG decline in 2020 followed by an +11% increase in 2021. We expect Carlsberg to be the only European Bevs company to recover back to its 2019 EPS level by 2021, thanks to cost-saving and buybacks (aided by its strong balance sheet). This performance (plus the long-term margin and CF generation opportunity) supports a premium valuation: 23.5x 21E P/E is c12% premium to the EU Beverages sector P/E of 21x,” she added.
For the stock list on the Nasdaq, four analysts forecast the average price in 12 months at $158.97 with a high forecast of $158.97 and a low forecast of $158.97. The average price target represents a 501.02% increase from the last price of $26.45. From those four, three analysts rated ‘Buy’, one rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.
This article was originally posted on FX Empire
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