Thai Beverage – Cost controls will be key

Excerpts from CGS International report

Thai Beverage PCL (SGX: Y92)

• Thai Beverage 1QFY9/25 revenues grew 2.4% yoy on solid volume growth in beer and non-alcoholic beverages (NAB) but EBITDA (flat yoy) was a slight miss.
• NAB EBITDA margin rose 140bp yoy with efficiency gains but was offset by spirits margin, -200bp yoy due to higher input costs and marketing spend.
• Volume growth and cost control are key in the coming quarters, in our view.

We reiterate Add and our TP but cut our FY25F EBITDA forecast on higher input costs and SG&A

1QFY9/25: Revenue in line, EBITDA slight miss

Thai Beverage (THBEV) reported 1QFY9/25 revenues at THB92.3bn (+2.4% yoy), which formed 26% of our FY25F forecast, in line with expectations. Robust sales volumes in beer (+11.8% yoy) and non-alcoholic beverages (NAB, +7.5% yoy) compensated for weak spirits volumes (-6.2% yoy). 1Q EBITDA was broadly flat yoy but slightly below expectations at 24% of our FY25F forecast (vs. 28% over FY17-22) due to cost pressures (including raw materials) for spirits production and higher-than-expected marketing spend for its new premium whisky, PRAKAAN, launched in Sep 2024.

Domestic beer strength offset unfavourable FX in Vietnam

In our view, continued tourism growth in Thailand and aggressive promotions in Vietnam supported THBEV’s 11.8% yoy beer sales volume growth in 1Q. We estimate strong revenue growth in Thailand was partially offset by depreciation of the Vietnamese dong against the Thai baht (-8% yoy). Excluding this, THBEV’s Vietnam subsidiary SABECO (SAB VN, NR, CP: VND 51,700) reported c.5% yoy revenue growth in the Oct-Dec quarter. THBEV’s beer segment EBITDA grew 16.6% yoy despite unfavourable FX and higher SG&A at SABECO. The exchange rate has broadly stabilised since Sep 2024 (Fig 9).

NAB margin expansion could be outweighed by higher spirits cost

As per THBEV’s NAB subsidiary F&N (FNN SP, NR, CP: S$1.30), the Oct-Dec period saw strong buying of soft drinks ahead of the Lunar New Year (LNY). NAB segment’s 1Q EBITDA margin grew c.140bp yoy to 19.7%, which THBEV attributes to production efficiencies and a favourable cost environment. We revise our FY25F group EBITDA margin forecast to 18% from 18.8% previously as we expect margin improvements in NAB to be outweighed by input cost pressures in spirits and higher SG&A in beer. We keep our FY26F/27F EBITDA margin estimates unchanged at 18.9%/19%.

Valuation/Recommendation

Reiterate Add; Thailand tourism is back to 2019 levels. Data from Thailand’s Ministry of Tourism reported LNY-driven tourist arrivals of 3.7m in Jan 2025, reaching 2019 levels and up 11% from last year’s LNY period in Feb 2024. We maintain Add on THBEV as we expect continued strength in beer revenues and margin improvement in the NAB segment. We also maintain our SOP-based TP at S$0.58. Rerating catalysts: stronger margins on lower-than-expected input costs and cost controls. Downside risks: macroeconomic weakness impacting sales volumes, and lower margins amid higher SG&A spend.

You can find the full report here and the company website here.