The 10% excise duty hike proposed in Budget 2026 is negative to the brewery sector, but could be already in the price with the brewery stocks trading well below their historical mean. Demand could be dented in the immediate term before eventually normalising. Margin expansion and
premiumisation strategies will continue to be the primary drivers for earnings growth and high dividend payout.
The excise duty on alcoholic beverages, including beer, will be hiked by 10% effective 1 Nov 2025. Recap, the last increase took place in Mar 2016 when it was rebased from excise per litre of beverage to excise per litre of alcohol in beverage. RHB Research, in its assessment of the sector, expects the brewers to fully pass on the excise duty with AS adjustments of 4-5%. A mitigating alternative is to lower the alcohol content, but that will require outstanding R&D effort to reformulate the products without affecting the taste and quality.
The house said it is negative on the excise duty hike, highlighting that the last excise duty
Hike in 2016 did not lead to adverse earnings impact – Heineken and Carlsberg Brewery’s (CAB MK, BUY, TP: MYR20) Malaysia operations recorded earnings growth of 9% and 15% after Mar 2016.
That said, beer ASPs have been raised twice in recent years (Apr 2024 and Aug 2025). Hence, the upcoming increase to could see a stronger impact to demand after also considering the current subdued consumer sentiment on the back of inflationary pressures. Contraband trade, which has been kept largely at bay in recent years (estimated 25% market share), could capitalise on the wider ASP gap. RHB cuts its FY26F-27F earnings by 4% and 3% to reflect more conservative volume assumptions. Our DDM-derived TP drops to MYR26.50 (inclusive of a 6% ESG premium and implies a 17x FY26F P/E) after tweaking risk assumptions to reflect the risk of rising contraband market share.
