KUALA LUMPUR: HEIM could see an earnings recovery from the fourth quarter (4Q26) of financial year 2026 (FY26), as distributor inventory normalisation nears completion, although structurally weaker beer consumption is expected to limit the pace of growth, according to CGS International (CGSI) Research.
The brokerage has upgraded its recommendation on the brewer to “Add” from its previous rating, saying the counter's 39.3% share price decline over the past 12 months, compared with the 's 2.4% decline, appeared excessive.
The research house, however, lowered its target price (TP) to RM15.80, reflecting weaker long-term growth prospects amid softer beer consumption.
At the revised valuation, Heineken is trading at 11.4 times its forecast price-to-earnings ratio for FY27, with an estimated dividend yield of 8.8%.
Heineken Malaysia's net profit for 3Q26 rose 36.9% quarter-on-quarter (q-o-q) to RM69.2 million, although it was 38.7% lower year-on-year (y-o-y).
This brought its cumulative nine-month net profit to RM224.2 million, down 29.5% y-o-y, representing 74% of CGSI Research's full-year forecast and 66% of Bloomberg consensus estimates.
The research outfit deemed the results to be in line with expectations, taking into account the seasonally stronger fourth quarter, which typically benefits from festive demand.
Revenue recovered 24% q-o-q in 3Q26 but remained 17.8% lower y-o-y, reflecting weaker sales volumes amid subdued beer consumption.
The research house noted that distributor inventory normalisation, which had weighed on sales during the first half of FY26, was substantially completed in the third quarter and was expected to conclude by the fourth quarter.
"As destocking ends, we expect sell-in to better align with sell-through from 4Q26F onwards," it said.
However, CGSI Research cautioned that the recovery would likely remain gradual due to structurally softer beer consumption, the shift in demand from on-trade to off-trade channels and stricter enforcement of drunk-driving laws.
The research unit lowered its FY28 revenue forecast by 5.6% and net profit projection by 3.7%, reflecting slower expected sales volume growth.
It maintained its FY26 and FY27 earnings per share forecasts, as the nine-month results were broadly in line with expectations, while anticipating a gradual recovery following the completion of distributor destocking.
CGSI Research expects higher average selling prices, supported by a richer product mix towards premium brands and the continued pass-through of higher costs to consumers, to partly offset weaker sales volumes.
It also lowered its long-term growth assumption from 3.5% to 2%, resulting in a reduced Gordon Growth Model-derived TP of RM15.80.
Potential re-rating catalysts include a stronger-than-expected recovery in consumer spending and on-trade demand, easing input costs and higher-than-expected export volumes to Singapore.
Downside risks include weaker consumer demand for alcoholic beverages, sluggish tourist arrivals, a prolonged destocking cycle beyond 4Q26 and stricter enforcement of drunk-driving laws further affecting on-trade sales.