Thai Beverage 1QFY25 Business Update - Phillip Securities 2025-02-17: A Slow Start

• Thai Beverage's 1QFY25 revenue/EBITDA were 25/30% of our forecasts.
• Spirits is 48% of EBITDA and a much larger 75% of PATMI due to the high minority stake and interest expense of the beer business. Spirits volume declined 6.2% y-o-y in 1QFY25, the weakest in 8 quarters. We believe this is in part due to overstocking in the prior quarter.
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The Positive

Sustained beer recovery.

• Beer volumes have been above 600mil litres for the past two quarters. Macro recovery in Vietnam and the rebound in tourist spending in Thailand have helped. The rebound of 1QFY25 volume was due to poor base effects.
• We only expect 4% volume growth in 2025 due to intense competition.

The Negative

Weak spirit demand.

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Outlook

• We expect FY25e to be a year of recovery for Thai Beverage largely due to improving macro conditions and government spending.
• Gross margins should be stable, with the pressure only from aluminium cans. Malt and molasses costs will be refreshed with lower-cost inventory. Operating margins remain under pressure from competitive advertising and promotional spending.
• We worry that the structural decline in spirit demand and competitive pressure in the beer segment will depress valuations.

Downgrade to ACCUMULATE from BUY with a lower target price

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Paul Chew Phillip Securities Research | https://www.poems.com.sg/ 2025-02-17 SGinvestors.io

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