• Maintain BUY, with new TP of SGD0.91 from SGD0.97, 49% upside and c.4% FY23F (Sep) yield. Thai Beverage’s FY22 earnings were in line with our, but above consensus expectations, thanks to the encouraging volume recovery in beer markets whilst impact from cost inflation was also well contained. We foresee the recovery momentum continuing into FY23F on a further pick-up in tourism activities. We continue to like the company as a major proxy to capitalise on the recovery, taking into account its strong market presence and brand equity.

• FY22 earnings met our, but beat consensus expectations. Core net profit of THB30.1bn (+22% YoY) accounted for 101% and 106% of our and Street estimates. Post-results, our FY23F-24F earnings are revised up by 1-3% and we roll out FY25 forecast, which implies 5% growth. Our TP drops to SGD0.91 (inclusive of a 4% premium on our ESG score of 3.2) after accounting for FY22 numbers and updating of our risk assumptions.

• Results review. FY22 revenue rose 13% to THB275.4bn driven primarily by the strong recovery in beer segment (+24%) whilst the non-alcoholic beverages (NAB) and food segments also chalked up encouraging growth on the back of broader reopening of economies. GPM slipped marginally by 0.2ppt to 29.5% as the higher input costs were partially mitigated by price adjustments. Operating profit surged 14% to THB38.6bn as the company also incurred higher A&P expenses for brand building and to stimulate consumer spending. By segment, the beer segment was again the key driver with a 39% jump in EBITDA contribution thanks to the 15% volume growth. Meanwhile, the ease in COVID-19 related restrictions and reopening of international borders also aided the recovery in both NAB and food segments.

• Outlook. Looking forward, we foresee the positive recovery momentum to sustain into FY23F. This is taking into account further normalisation of economic activities whilst the progressive pick-up in tourist arrivals should also lift consumption and benefit all of the company’s business divisions. Meanwhile, we expect the price increases and continuous efficiency gain to mitigate some of the impact of higher raw material costs. Hence, we expect GPM to stay relatively stable notwithstanding the volatile commodity prices. On the other hand, distribution costs should remain elevated as THBEV may look to intensify its brand building marketing initiative to spur spending and strengthen its market share now that most of the restrictions are lifted.

• Risks to our recommendation include higher-than-expected input costs and slower-than-expected pick-up in tourism activities.

Source: RHB Research - 28 Nov 2022