• Thai Beverage's 1HFY21 net profit of THB14.4bn (-0.4% y-o-y) was in line at 53.8%/54.8% of both our and consensus’ FY21F net profit of THB26.7bn/THB26.2bn.
• Cost savings were still the saviour, mitigating 1H revenues that fell 4.3% y-o-y. We trim FY21-23F earnings per share forecast as we opt to be conservative on forward margins.
• Although its beer IPO has been delayed, we still like Thai Beverage's defensive domestic Thai spirits business. Reiterate ADD with a lower SOP-based target price of S$0.84.

Thai Beverage's 1HFY21 Cost Controls Again to the Rescue

• Thai Beverage (SGX:Y92)’s 1HFY21 (Oct 2020 to Mar 2021) revenue fell 4% y-o-y to THB131.3bn, largely on declines in its beer, non-alcohol and food revenues which fell 5.1%, 12.6% and 19.9% y-o-y, respectively. However, lower distribution (-~13% y-o-y) and administrative (-~11% y-o-y) costs in the 1H again led to better 1H21 EBIT margins (15% vs 13.3% in 1H20), keeping Thai Beverage’s core net profit mostly intact (-0.4% y-o-y).

Steady Spirit Volumes Mitigate Beer and Non-alcohol Volume Falls

• Overall 1HFY21 spirit volumes showed resilience, falling -1.2% y-o-y, as Thai Beverage’s Thai white spirits (a result of downtrading behavior, in our view) continued to mitigate the falls in its Thai brown spirits and Myanmar spirit volumes.
• 1HFY21 beer volumes fell ~5%, largely on declines in Thai volumes (-~7.9% y-o-y) following a resurgence of new COVID-19 cases in Thailand in late-Dec 20).
• Non-alcoholic beverage volumes fell 14.6% y-o-y.

Trim Thai Beverage's FY21-23F Earnings Per Share Forecast by 2.7%-3.2%

• We opt to put pressure on our forward EBIT margins. We cut our Thai Beverage's FY21-23F earnings per share forecast by 2.7%/3.2%/3.1%.

Reiterate ADD on Thai Beverage

• Despite near-term behaviour in Thailand, and its continued drive to gain market share over the long-term in Vietnam.
• We reiterate ADD on Thai Beverage with a lower SOP-based target price of S$0.84 (vs. S$0.87 previously).

• Potential re-rating catalysts include a swift recovery in volumes, resumption of M&As involving F&N (SGX:F99) and Frasers Property (SGX:TQ5), and lower dividends.

Source: CGS-CIMB Research - 14 May 2021