Thai Beverage - Phillip Securities 2022-02-16: Spirits Rise But For The Margins

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THAI BEVERAGE PUBLIC CO LTD (SGX:Y92)

Thai Beverage - Spirits Rise But For The Margins

• Thai Beverage (SGX:Y92)'s 1Q22 revenue and EBITDA met expectations at 30% and 31% of our FY22e forecasts respectively. 1Q is a seasonally stronger quarter. No analysts’ briefing and limited financials provided in 1Q22 update.
• Spirit volumes continue to grow to record levels but margins were hurt by rising molasses cost and a weak Myanmar Kyat. Beer volumes are still 10% below pre-pandemic levels.
• Our target price for Thai Beverage stays at S$0.765, based on 18x FY22e earnings, its 5-year average.

The Positive

Jump in spirit volumes.

• After a disappointing 4Q21, there was an 8.6% y-o-y jump in spirit volumes in 1Q22 to 206mil litres, or a 48% q-o-q improvement. When measured over 6 months till Dec 21, volumes are still down 4.5% y-o-y. Surprisingly, revenue growth in 1Q22 was much softer than volumes.
• We believe the weaker Myanmar Kyat pulled down spirits revenue. Volume growth in Thailand may also be driven by some front-loading of orders before the price increase introduced during the quarter.

The Negative

Margins headwinds.

• Rising margin pressure from raw materials and normalising of advertising and marketing costs will be the key challenge in FY22e. The beer division has managed to contain some of the margin pressure by raising prices by around 9%. Despite the aggressive rise in prices margins contracted.

Outlook

• We expect a recovery year in FY22e. Thai Beverage's revenue is expected to rebound as lockdown measures are removed, entertainment outlets and borders re-open and economic conditions improve in Thailand and Vietnam. An added driver will be price increases from the spirits and beer divisions to mitigate the cost pressures.

Maintain ACCUMULATE with unchanged target price of S$0.765

• Our FY22e earnings forecast Thai Beverage are unchanged. Earnings growth in FY22e will be supported by price increases for spirits, easing of lockdowns and general improvement in economic conditions in Thailand and Vietnam.
• Maintain ACCUMULATE rating on Thai Beverage with an unchanged target price of S$0.765, 18x FY22e earnings, its 5-year average.
• See
  • Thai Beverage's Share Price,
  • Thai Beverage's Target Price,
  • Thai Beverage's Analyst Reports,
  • Thai Beverage's Dividend History,
  • Thai Beverage's Announcements,
  • Thai Beverage's Latest News.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2022-02-16

SGX Stock Analyst Report ACCUMULATE MAINTAIN ACCUMULATE 0.765 SAME 0.765