Carlsberg (Baa2 Pos, NR, BBB+ S) Follow Up; Credit curve unch, Moody's upgrade may be in sight

Unclear if Moody’s will follow with an upgrade after a small beat in Q4, miss on FY24 guidance & lift in long-term guidance. The marginal increase in leverage over this year is unimportant - well below stated ceiling of 2* - Moody’s needed leverage to remain below 2* for an upgrade – that also may limit any headwinds from the announced 1b buyback in 1Q (3b last yr, dividend flat).

The criteria for Moody's was consolidating position in Asia markets – that’s been mixed – organic revenue in Asia came below expectations at +8.4% (c+8.5%) with key China sales deteriorating during the year. At 23b/30%+ of revenue Asia is a key market particularly for future growth (more than double the rate of Europe over next 2 years at ~7.5% organic growth forecast).

Earnings call didn’t point to a recovery yet in Asia; “for now it’s a subdued consumer in Southeast Asia” but also clarifying “not deteriorating further” – i.e. stabilised. Re. what is included in current guidance management said no strong recovery forecasted in SE Asia - merely a stabilisation through the year with a “little bit more consumption”. As expected, all highly dependent on Chinese economy.

Regardless upgrade might have limited impact on its curve – F&B/consumer BBB space trades tight (helped by recent compression). 25’s (G+66) & 33’s (+134) on both end of its curve look the cheapest on a firming into BBB+.

Equity analyst takes https://blinks.bloomberg.com/news/stories/S8H5IFDWRGG0