CGS-CIMB Research is keeping its “add” recommendation on Thai Beverage (ThaiBev) with a target price of 88 cents as analyst Ong Khang Chuen notes a solid set of 3QFY2022 (ended September) from its 53.6%-owned Vietnam subsidiary Sabeco.
Sabeco saw 3QFY2022 revenue grow to VND8.6 trillion ($490 million), representing a 4% q-o-q decline but a 102% y-o-y growth, from a low base, as Vietnam was under strict social distancing measures with Ho Chi Minh city in total lockdown from late July to October 2021.
While gross profit margin (GPM) contracted 3.1 percentage points (ppts) to 31.2% due to higher input costs during the quarter, it still remains higher compared to 3QFY2021’s 26.7%.
“The sequential GPM contraction did not come as a surprise, as Sabeco typically has six to 12-month forward contracts for its raw material procurement, hence the higher barley prices in early-2022 are now being reflected,” says Ong, while noting that Sabeco raised average selling prices (ASPs) in December 2021 and April this year to pass on cost pressures; it does not rule out further price hikes.
Overall, 3QFY2022 patmi came in at VND1.3 trillion, representing a 20% q-o-a decline but a 202% y-o-y increase, thanks to stronger operating leverage.
For the 9MFY2022 period, revenue was 44% higher y-o-y at VNY25.0 trillion, broadly in-line with expectations at 74%/72% of Refinitiv consensus/company guidance for FY2022. Meanwhile, 9MFY2022 patmi growth of 77% y-o-y to VND4.2 trillion appears to track ahead of expectations at 84%/91% of Refinitiv consensus/company guidance for FY2022.
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“We think Sabeco’s 3QFY2022 results could be a slight positive read-through to ThaiBev’s upcoming FY2022 (ended September) results – Sabeco typically makes up about 10-15% of ThaiBev’s net profit,” says Ong.
To that end, Ong expects ThaiBev to see earnings growth in FY2022, as it rides on easing Covid-19 restrictions in Thailand and Vietnam, while valuations remain attractive with forward P/E at about 1 standard deviation below historical mean. “ThaiBev also offers defensiveness in view of potential economic slowdown in 2023, given its strong positioning in the mass segment (potential beneficiary of downtrading), in our view,” says Ong.
“With Thailand’s further economic reopening and improving consumer sentiment in July-September quarter, we forecast ThaiBev’s 4QFY2022 revenue/EBITDA to grow 34%/56% y-o-y, respectively,” he adds.
