Excerpts from CGSCIMB report

Thai Beverage (SGX: Y92)

• Thai Beverage 2QFY9/23 PATMI grew to THB7.4bn (+3% yoy), in line. Spirits segment strength offset weaker performance in beer and food segments.
• Outlook generally positive in TH with economic reopening and upcoming elections; VN remains challenging but green shoots are appearing.
• Margin inflection is near with higher-priced raw materials inventory being depleted and SG&A spend now at sustainable level.

Reiterate Add with TP of S$0.88

2QFY9/23 largely in line with expectations

Thai Beverage (THBEV)’s 2QFY9/23 PATMI grew to THB7.4bn (+3% yoy), bringing 1HFY9/23 PATMI to THB16.1bn (-1% yoy), largely in line with expectations with 1H PATMI forming 51%/55% of our/Bloomberg consensus forecasts.

The stronger performance in 2Q was underpinned by strength in the spirits business, which saw revenue/EBITDA grow 7.8%/8.9% yoy (stronger brown spirits sales).

This successfully offset declines in beer (weaker Vietnam volumes, higher SG&A spend) and food (higher input costs) segments.

Cautiously optimistic on topline outlook

We forecast 7.1% revenue growth in 2HFY23F. Outlook for Thailand remains positive generally – brown spirits saw strong recovery momentum with double-digit volume growth in 1HFY23 post resumption of on-trade, and THBEV is currently working on further price
adjustments.

While beer industry volume recovery in Thailand was rather bumpy, THBEV notes that it has been closing market share gap vs. Leo over the past two quarters (after a sales team revamp to improve collaboration across product groups).

Upcoming general elections bode well for beer consumption in Apr, and THBEV expects the incoming government to roll out favourable policies to aid consumer spend.

In Vietnam, macro environment remains challenging, but THBEV sees green shoots of recovery with inflation stabilising and central bank cutting policy rates to support economic growth.

Valuation/Recommendation

Reiterate Add and SOP-based TP of S$0.88. We continue to like THBEV as a proxy for Thailand’s economic recovery riding on tourism recovery, and improving consumer sentiment.

THBEV trades at an undemanding valuation of 12.9x CY23F P/E, some 1.5 s.d. below its historical average. Potential re-rating catalysts include stronger-than-expected margin improvement.

Downside risks include weaker macroeconomic environment dampening volume, or higher-than-expected SG&A spend dampening margins

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