RHB Group Research team has kept a “buy” rating on Thai Beverage (ThaiBev) with a target price of 97 cents.

ThaiBev’s 1HFY2022 ended March results beat the research team’s expectations due to a faster-than-expected recovery pace. The group’s net profit of THB16.3 billion ($653 million) accounted for 58%-59% of the research team’s and consensus forecasts as demand recovery was stronger than expected.

“Post-results, we raise FY2022-FY2024 earnings by 5%-6%,” writes the research team. “Moving forward, we expect the encouraging momentum to continue in view of the better containment of Covid-19 and broader reopening of regional economies.”

Thai Bev’s 1HFY2022 sales rose 9% y-o-y to THB143 billion with all operating divisions recording encouraging improvement due to the broader reopening of regional economies on the back of better containment of Covid-19.

In particular, the group’s beer business chipped in the most with 1HFY2022 revenue jumping 15% on a 5.5% increase in volume and hike in selling prices.

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Additionally, the food division recorded a sharp sales recovery of 31% as the restaurant business benefited from the return of dine-in crowds.

That said, 1HFY2022 operating profit only grew 7% to THB21.3 billion as higher raw material and distribution costs partially offset the impact of the robust topline growth.

However, the group’s spirit business was dragged by an unfavourable product mix, which led to a 3% decline in ebitda, whereas the beer division was able to deliver a 19% leap in ebitda with margins expanding by 0.4ppts due to the volume recovery and average selling price (ASP) hike.

Additionally, the analysts expect BeerCo’s successful listing to unlock value and catalyse ThaiBev’s share price.

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“Looking forward, we foresee the positive recovery momentum to sustain into 2HFY2022,” says the research team. “This is taking into account further normalisation of economic activities whilst the gradual pick-up in tourist arrivals should also lift consumption and benefit all of Thai Bev’s business divisions.”

Meanwhile, the research team also expects prices to increase and continuous efficiency gain to mitigate some of the impact of higher raw material costs.

“On the other hand, distribution costs should remain elevated as the company may look to intensify its brand building marketing initiatives to spur spending and strengthen market share now that most of the restrictions have been lifted,” writes the research team.

“We continue to like Thai Bev as a proxy to capture the consumption recovery thanks to its strong brand equity and effective marketing initiatives,” they add.

As at 2.30pm, shares in Thai Bev are trading at 1 cent up or 1.47% higher at 69 cents at a FY2022 P/B ratio of 2.5x and dividend yield of 3.6%.

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