Thai Beverage - CGS-CIMB Research 2021-05-14: 2Q21 Saved By Costs

THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - 2q21 Saved By Costs

Thai Beverage's 1HFY21 net profit of THB14.4bn (-0.4% y-o-y) was in line at 53.8%/54.8% of both our and consensus’ FY21F net profit of THB26.7bn/THB26.2bn.
Cost savings were still the saviour, mitigating 1H revenues that fell 4.3% y-o-y. We trim FY21-23F earnings per share forecast as we opt to be conservative on forward margins.
Although its beer IPO has been delayed, we still like Thai Beverage's defensive domestic Thai spirits business. Reiterate ADD with a lower SOP-based target price of S$0.84.

Thai Beverage (SGX:Y92)’s 1HFY21 (Oct 2020 to Mar 2021) revenue fell 4% y-o-y to THB131.3bn, largely on declines in its beer, non-alcohol and food revenues which fell 5.1%, 12.6% and 19.9% y-o-y, respectively. However, lower distribution (-~13% y-o-y) and administrative (-~11% y-o-y) costs in the 1H again led to better 1H21 EBIT margins (15% vs 13.3% in 1H20), keeping Thai Beverage’s core net profit mostly intact (-0.4% y-o-y).

Overall 1HFY21 spirit volumes showed resilience, falling -1.2% y-o-y, as Thai Beverage’s Thai white spirits (a result of downtrading behavior, in our view) continued to mitigate the falls in its Thai brown spirits and Myanmar spirit volumes.
1HFY21 beer volumes fell ~5%, largely on declines in Thai volumes (-~7.9% y-o-y) following a resurgence of new COVID-19 cases in Thailand in late-Dec 20).
Non-alcoholic beverage volumes fell 14.6% y-o-y.

We opt to be conservative on Thai Beverage’s near-term prospects as we think there is potential that revenue growth could slow down with tightening measures being implemented from Apr 21 onwards due to COVID-19.
We also think the lower revenues will lead to operating deleverage which could also put pressure on our forward EBIT margins. We cut our Thai Beverage's FY21-23F earnings per share forecast by 2.7%/3.2%/3.1%.

Despite near-term uncertainties with regards to the resurgence of COVID-19 cases in key geographies that Thai Beverage operates in, and the BeerCo IPO being deferred, we nonetheless continue to like Thai Beverage for its spirits business which we believe could still be a main beneficiary of the potential downtrading behaviour in Thailand, and its continued drive to gain market share over the long-term in Vietnam.
We reiterate ADD on Thai Beverage with a lower SOP-based target price of S$0.84 (vs. S$0.87 previously).
See
Potential re-rating catalysts include a swift recovery in volumes, resumption of M&As involving F&N (SGX:F99) and Frasers Property (SGX:TQ5), and higher valuations for the BeerCo listing.
Downside risks: sluggish volume recovery and lower dividends.

Cezzane SEE CGS-CIMB Research | https://www.cgs-cimb.com 2021-05-14

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