• 2Q15 PATMI grew 6.2% YoY
• Lower volume growth for alcohol post-tax implementation
• Estimates unchanged as results inline

2Q15 results within expectations

Thai Beverage PLC’s (ThaiBev) 2Q15 results were in line with our expectations amid uncertainties over economic growth in Thailand. Revenue was down 2.6% YoY to THB39.0b, which met 23% of our FY15F, as sales from all segments grew except for Spirits. There were also improvements in overall margins, as EBITDA margin gained 1.5ppt to 21.5% and net profit margin was 1.6ppt up to 15.3%. PATMI rose 6.2% to THB5.9b, meeting 25% of our full-year estimates.

Beer continues to grow

Recall that there was increased stockpiling by agents prior to the tax implementation, which drove volume growth for the alcoholic segments seen in 1Q. In 2Q, Spirits’ revenue fell 4.7% to THB24.1b, due to agents destocking post implementation of the new tax from 27 Mar-15. This segment did maintain its gross profit margin (“GPM”) at 33.8%, but with higher staff costs and A&P expenses, net profit was down 6% to THB4.6b. Beer’s revenue was steady at THB8.8b albeit volume was 4% lower. GPM was also maintained at 1Q15 level of ~20% vs. FY14 of ~18% due to lower material costs, and net profit was up 95% to THB158b.

A&P remains high with non-al beverages

The NAB business continued to incur high A&P expenses due to new products launches. There was a one-time gain on sales of THB446m as Sermsuk sold and transferred ownership on the plot of land and building to a related company, without which, the NAB business would have recorded a 63% higher net loss of THB608m.

Maintain BUY

On the broader economy, Thailand’s finance ministry is now expecting a slower growth rate of 3.0%, mainly due to a drag in export growth. The familiar household debt level issue also keeps its weight on private consumption. Nonetheless, ThaiBev sees support from higher tourism levels this year as well as strong government spending and investment. We are keeping our estimates unchanged for now. Maintain BUY with fair value estimate of S$0.83.

Source: OCBC Research - 17 Aug 2015