Excerpts from CGS International report
Thai Beverage (SGX: Y92)
- Thai Beverage 2QFY9/24 core operations improved, with revenue returning to growth, but PATMI missed due to associates drag.
- Beer consumption showed a recovery across markets in 2QFY24 and could see positive momentum ahead. However, spirits sales in TH were soft.
Valuations are undemanding but we reiterate Hold on lack of near-term catalysts with spirits segment’s (80% of PATMI contribution) softer outlook.
2QFY9/24: Core operations improved, but associates a drag
Thai Beverage’s (THBEV) core operations rebounded in 2QFY24, with revenue and EBITDA growing by 6% and 8% yoy, respectively, but lower share of profits from associate FPL (FPL SP, Add, TP: S$1.41, CP: S$0.80) resulted in PATMI decline of 5% yoy.
While THBEV’s 1HFY24 revenue met our expectations (52.7% of our FY24F estimate), we think the overall results fell short of Bloomberg consensus estimates, with 1HFY24 revenue and PATMI both coming in below the average run rate over the past five years.
1HFY24 net profit was 53% of our FY24F forecast (FY18-23 average: 57%).
Seeing positive momentum for the beer segment
Beer sales recovered to grow 13% yoy in 2QFY24, partially offsetting the weakness observed in 1Q, resulting in 1HFY24 decline of 3% yoy. Vietnam led growth in 2QFY24, with beer sales up 16% yoy.
THBEV sees green shoots of recovery for the beer segment in Vietnam as industry production numbers returned to positive yoy growth in Apr.
In Thailand, THBEV notes that beer sales benefited from warmer weather as well as increased tourist arrivals. THBEV believes it gained market share in Thailand during the quarter while new entrants have struggled to gain traction.
THBEV does not foresee an increase in SG&A expenses to defend share given the current competitive landscape.
Spirits sales remained soft in Thailand
Spirits sales grew 1% yoy in 2QFY24 as higher ASPs offset volume declines of 1% yoy. In Thailand, brown spirits sales volume saw a mid-single-digit decline yoy in 1HFY24 while white spirits consumption remained relatively flattish yoy.
THBEV notes that while there was a good recovery in brown spirits consumption last year on post-Covid-19 reopening, it fizzled out this year due to challenges posed by a weak economy.
On the international front, the spirits business performed well, with higher volumes and profits in Myanmar.
Valuation/Recommendation
While THBEV’s valuations are undemanding, we reiterate Hold as we see FY9/24F risks from soft spirits sales volume in Thailand (which accounts for 80% of attributable profit to shareholders) and weaker associate earnings.
Our SOP-based TP is unchanged at S$0.50. Upside risks: better-thanexpected EBITDA margins on lower input costs and cost control. Downside risks include prolonged weakness in the Thai and Vietnam macroeconomic environment dampening its sales volumes, and higher-than-expected SG&A spend hurting margins.
You can find the full report here and the company website here.
