- Thai Beverage's 1HFY25 revenue/PATMI were 49%/50% of our forecasts.
- 2QFY25 spirits revenue grew 2.1% y-o-y, but net profit (81% of group) declined 5.7% due to higher raw materials and marketing spend.
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The Positive
Modest recovery in spirit volumes.
- Spirit volumes have been stable. Trailing annual volume is 488.1mil litres, up 0.4% y-o-y after three quarters of decline.
- We believe revenue growth was much weaker due to some price discounts to improve volumes.
The Negative
Sabeco's collapse in earnings.
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- We believe price discounting due to intense competition and downtrading was a drag on revenue. Thailand beer volumes fared better due to higher tourism spending.
Outlook
- We expect 2HFY25 to remain sluggish. There is upside in gross margins from lower packaging and molasses costs. Due to the softer consumer sentiment and macroeconomic environment, we expect Thai Beverage to tighten its marketing spend further to grow earnings.
- The impact of tariffs is minimal with hops imported from the US. Market conditions remain soft for any revival of a beerco listing or transaction.
Maintain ACCUMULATE with unchanged target price of S$0.56.
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