CGS-CIMB Research analysts Ong Khang Chuen and Kenneth Tan have downgraded Thai Beverage Y92 (ThaiBev) to “hold” from “add” as the group’s beer sales disappointed their expectations during the 1QFY2024 ended Dec 31, 2023.
Overall, the group’s revenue, which fell by 5.9% y-o-y to 76.11 billion baht ($2.84 billion), also stood lower than Ong and Tan’s expectations due to a weaker beer segment.
Revenue for beer fell by 14% y-o-y in the 1QFY2024, marking a steeper decline than the 6% to 8% y-o-y drop in the previous three quarters.
“We think this suggests a deterioration in Thailand volumes, while Vietnam volumes also remained weak,” say the analysts. “ThaiBev attributed the weaker beer volumes (-15% y-o-y) to a slower-than-expected economic recovery, but we think the weaker sales could also raise concerns over market share impact as this coincided with the launch of beer products by new entrant Tawandang 1999 in Thailand.”
“In Vietnam, ThaiBev’s subsidiary Sabeco saw muted sentiment from pre-Tet sales in Jan 2024, with distributors reluctant to carry more inventories,” they add.
That said, ThaiBev’s management is “cautiously optimistic” on a recovery in Vietnam for the second half of 2024 after a challenging year 2023. This, however, is premised on a macroeconomic recovery, cost efficiencies across production as well as spending on advertising and promotions. A consolidation of associate breweries – which is expected to take place in the second quarter of 2024 – is also an upside factor, according to the analysts.
Overall, the analysts see “risks” in ThaiBev’s FY2024 earnings from the beer segment with a slow recovery in Vietnam, and potential competitive threat from Tawandang in Thailand. The alcohol excise tax cuts that were announced in January are not applicable to ThaiBev’s spirits products, they note.
The analysts have also lowered their target price to 50 cents from 67 cents previously based on a lower EV/ebitda multiple for its Thai alcohol segments.
As at the analysts’ report, ThaiBev is trading at 49.5 cents. To them, ThaiBev’s valuations are undemanding at -1.5 standard deviations (s.d.) versus its historical average P/E since its listing.
As at 1.06pm, shares in ThaiBev are trading 0.5 cents lower or 1.01% down at 49 cents.
