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Analysts keep 'buy' call on ThaiBev following FY2022 earnings improvement

The Edge Singapore
The Edge Singapore11/28/2022 10:44 AM GMT+08  • 3 min read
Analysts keep 'buy' call on ThaiBev following FY2022 earnings improvement
For the year ended Sept 30, the Thailand-based beer and beverage giant reported earnings of 30.1 billion baht ($1.16 billion), up 22% y-o-y, driven by higher sales. Photo: Anastasiia Balandina on Unsplash
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Analysts are all advising investors to "buy" Thai Beverage (ThaiBev) following its FY2022 earnings reported last Friday, which indicated clear improvements thanks to the recovery from the pandemic which curbed consumption.

For the year ended Sept 30, the Thailand-based beer and beverage giant reported earnings of 30.1 billion baht ($1.16 billion), up 22% y-o-y, driven by higher sales. While all segments showed improvements, the beer business stood out with its 39% jump in operating profit thanks to a 15% increase in volume.

“We foresee the recovery momentum continuing into FY2023 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,” writes RHB Group Research's Singapore research team in its Nov 28 note.

The RHB team cautions that while ThaiBev will experience higher raw material costs, this can be offset with price increases and continuous efficiency. However, distribution costs might go up as the company steps up its branding activities to spur spending and capture more market share.

As such, RHB has trimmed its target price from 97 cents to 91 cents to take into updated risk assumptions including higher than expected input costs and also slower than expected pick up in tourist numbers.

UOB Kay Hian's Llelleythan Tan has similarly kept his "buy" call. However, to take into account "sharply lower" spirits consumption and lower margin estimates, he has cut his earnings forecast for the current FY2023 and following FY2024 by 13.9% and 15.8% respectively.

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As a result, Tan's new target price for the stocks is 73 cents, from 87 cents previously.

CGS-CIMB Research's Ong Khang Chuen and Kenneth Tan have kept their "add" call and 88 cents target price, as they see the company further benefitting from volume growth in Thailand and Vietnam.

At current levels, they believe ThaiBev is trading at an "undemanding" valuation of 12.6x FY2023 earnings.

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"Potential rerating catalysts include strong volume recovery. Downside risks include higher-than-expected input costs pressuring margins," they write.

DBS Group Research’s Andy Sim has similarly kept his “buy” call on the stock. In his Nov 28 report, he pegs ThaiBev as a stock worth 87 cents. Just on Nov 18, he reinitiated coverage on the company with a target price of 84 cents.

Sim notes that there are global uncertainties and potential headwinds on the macro front. However, demand for its products should remain “resilient”, with recovery seen in both key markets Thailand and Vietnam.

Sim also notes that ThaiBev has low refinancing risks and that its strong cash flow of at least 36 billion baht a year can easily deal with debentures of some 22 to 26 billion baht due over the next two years.

ThaiBev is now trading at around 14x forward earnings, which is around 1 standard deviation below the mean.

“We believe it has not priced in its potential as one of Southeast Asia’s largest food and beverage (F&B) players,” says Sim.

Thai Beverage shares traded at 62.5 cents as at 10.43am, up 2.46% thus far today.

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