UOB Kay Hian Tuesday, 13 May 2025 Thai Beverage Downgraded to HOLD: A Deep Dive into 1HFY25 Results and Future Outlook Thai Beverage (THBEV SP): Company Overview Thai Beverage Public Company, Thailand’s largest beverage producer, dominates the spirits market. The company’s diverse portfolio includes spirits, beer, non-alcohol beverages (NAB), and food products. [[1]] Stock Data and Key Metrics GICS Sector: Consumer Staples [[1]] Bloomberg Ticker: THBEV SP [[1]] Shares Issued (m): 25,130.5 [[1]] Market Cap (S\$m): 12,942.2 [[1]] Market Cap (US\$m): 9,971.6 [[1]] 3-mth Avg Daily Turnover (US\$m): 8.1 [[1]] 52-week High/Low: S\$0.595/S\$0.425 [[1]] Price Performance (%) 1 Month: 8.4 [[1]] 3 Month: (1.0) [[1]] 6 Month: 1.0 [[1]] 1 Year: 5.1 [[1]] Year-to-Date (YTD): (5.5) [[1]] Major Shareholders Charoen Sirivadhanabhakdi: 65.9% [[1]] Financial Data FY25 NAV/Share (Bt): 6.46 [[1]] FY25 Net Debt/Share (Bt): 7.29 [[1]] Investment Thesis: Downgraded to HOLD UOB Kay Hian has downgraded Thai Beverage to HOLD with a revised target price of S\$0.51 (previous TP: S\$0.56). [[1, 2]] The downgrade reflects concerns over margin compression and a challenging macroeconomic environment. [[2]] 1HFY25 Results: Below Expectations THBEV reported a 1.0% year-over-year increase in overall revenue for 1HFY25. [[1]] However, EBITDA decreased by 5.3% year-over-year, and PATMI fell by 3.2% year-over-year. [[1]] These declines were attributed to higher raw material and operating costs. [[1]] Segmental Performance Spirits Revenue: Bt64,520m (1HFY25) vs. Bt65,499m (1HFY24), a decrease of 1.5%. [[2]] EBITDA: Bt15,652m (1HFY25) vs. Bt17,177m (1HFY24), a decrease of 8.9%. [[2]] Driven by higher sales volume in 2QFY25, the spirits segment posted higher revenue but saw EBITDA drop from increased A&P spending and raw material costs. [[1, 2]] Beer Revenue: Bt66,201m (1HFY25) vs. Bt64,263m (1HFY24), an increase of 3.0%. [[2]] EBITDA: Bt8,170m (1HFY25) vs. Bt7,656m (1HFY24), an increase of 6.7%. [[2]] The beer segment was dragged by a weak performance in Vietnam despite lower raw material costs. [[2]] Non-Alcoholic Beverages (NAB) Revenue: Bt33,438m (1HFY25) vs. Bt32,618m (1HFY24), an increase of 2.5%. [[2]] EBITDA: Bt6,140m (1HFY25) vs. Bt6,249m (1HFY24), a decrease of 1.7%. [[2]] Food Revenue: Bt11,145m (1HFY25) vs. Bt11,068m (1HFY24), an increase of 0.7%. [[2]] EBITDA: Bt1,179m (1HFY25) vs. Bt1,340m (1HFY24), a decrease of 12.0%. [[2]] Key Financial Results 1HFY25 vs 1HFY24 Revenue: 177,617 Btm vs 175,896 Btm, +1.0% change [[2]] EBITDA: 31,111 Btm vs 32,842 Btm, -5.3% change [[2]] PATMI: 14,710 Btm vs 15,191 Btm, -3.2% change [[2]] EBITDA Margin (%): 17.5 vs 18.7, -1.2ppt change [[2]] PATMI Margin (%): 8.3 vs 8.6, -0.3ppt change [[2]] 2QFY25 Results Analysis Thai Beverage reported soft 2QFY25 results, with overall revenue declining by 0.6% year-over-year. [[3]] EBITDA and PATMI fell by 7.6% and 3.2% year-over-year, respectively. [[3]] Higher raw material costs, increased advertising and promotional (A&P) spending, and weaker beer sales in Vietnam contributed to the decline. [[3]] 2QFY25 EBITDA and PATMI margins compressed by 1.3ppt and 0.2ppt year-over-year, respectively. [[3]] Dividend Announcement The group declared an interim 1HFY25 dividend of Bt0.15 per share, consistent with 1HFY24. [[4]] UOB Kay Hian expects a similar FY25 total dividend of Bt0.62 per share, implying a 58% dividend payout ratio and a 4.7% yield. [[4]] Stock Impact Analysis Spirits Segment The spirits segment experienced a 1.9% year-over-year fall in sales volume. [[5]] Rising raw material costs led to an 8.9% year-over-year decrease in EBITDA. [[5]] The weaker-than-expected performance was primarily due to a soft 2QFY25. [[5]] Despite revenue growth in 2QFY25, EBITDA fell due to rising raw material costs and increased A&P spending. [[5]] Segmental margin fell 1.9ppt year-over-year. [[5]] Beer Segment 1HFY25 revenue increased by 3.0% year-over-year, and EBITDA increased by 6.7% year-over-year. [[5]] 2QFY25 revenue fell 2.4% year-over-year, dragged by a 17.8% year-over-year decrease in revenue from Sabeco. [[5]] 2QFY25 EBITDA remained largely stable, supported by cost efficiencies and lower raw material costs. [[5]] Non-Alcoholic Beverages (NAB) Segment 1HFY25 revenue grew by 2.5% year-over-year, driven by a 4.1% year-over-year increase in sales volume. [[6]] However, 1HFY25 EBITDA dropped by 1.7% year-over-year due to higher A&P spending. [[6]] 2QFY25 revenue fell by 1.9% year-over-year due to a change in product mix, while EBITDA dropped by 16.6% year-over-year from higher A&P spending. [[6]] Food & Others Segment For 1HFY25, food revenue was slightly higher (+0.7% yoy) but posted a sharply lower EBITDA (-12.0% yoy) from higher operating costs. [[6]] The others segment saw a lower 1HFY25 revenue (-4.8% yoy) with a Bt30m EBITDA loss due to lower licensing income and unfavourable forex movements. [[6]] Earnings Revision and Risk Assessment UOB Kay Hian has cut its FY25-27 PATMI estimates by 8-11% due to lower spirits and beer sales volume assumptions and lower overall margins. [[6]] The new FY25-27 PATMI estimates are Bt26,870m, Bt28,520m, and Bt29,745m, respectively. [[6]] Valuation and Recommendation Downgraded to HOLD with a lower SOTP-based target price of S\$0.51 (S\$0.56 previously). [[7]] The revised target price reflects lower valuations for both the spirits and beer segments due to cut segmental EBITDA. [[7]] Muted earnings growth, dragged by a challenging outlook, is expected to weigh on share price performance. [[7]] Potential Share Price Catalysts Gaining market share in the beer segment. [[7]] Potential M&As or spinoff listings. [[7]] Key Financials (Btm) Year to 30 Sep 2023 2024 2025F 2026F 2027F Net turnover 332,931 340,289 344,753 357,440 369,642 EBITDA 49,752 52,730 55,718 58,754 60,936 Operating profit 39,624 42,430 44,840 47,581 49,459 Net profit (rep./act.) 27,434 27,215 26,870 28,520 29,745 Net profit (adj.) 27,434 27,215 26,870 28,520 29,745 EPS (Bt) 1.1 1.1 1.1 1.1 1.2 PE (x) 12.0 12.1 12.2 11.5 11.1 P/B (x) 1.2 2.2 2.0 1.9 1.7 EV/EBITDA (x) 12.6 11.9 11.3 10.7 10.3 Dividend yield (%) 4.6 4.7 4.7 4.8 5.0 Net margin (%) 8.2 8.0 7.8 8.0 8.0 Net debt/(cash) to equity (%) 67.4 125.5 113.0 101.2 89.8 Interest cover (x) 6.5 6.3 6.7 7.0 7.5 ROE (%) 11.5 12.9 17.3 16.9 16.3 Consensus net profit – – 30,204 32,832 34,249 UOBKH/Consensus (x) – – 0.89 0.87 0.87 SOTP Valuation (Btm) Spirits: 10x FY25F EV/EBITDA = 293,779 [[7]] Beer: 8x FY25F EV/EBITDA = 163,706 [[7]] NAB: 12x FY25F EV/EBITDA = 164,015 [[7]] Food: 8x FY25F EV/EBITDA = 18,544 [[7]] Vinamilk Market Value: 21,713 [[7]] Total: 661,757 [[7]] Less: Net debt, Minority Interest = (334,304) [[7]] Value: 327,453 [[7]] Per share (S\$): 0.51 [[7]] Detailed Financials Profit & Loss (Btm) Year to 30 Sep 2024 2025F 2026F 2027F Net turnover 340,288.8 344,753.1 357,440.3 369,642.0 EBITDA 52,730.1 55,717.8 58,754.0 60,935.6 Deprec. & amort. 10,300.6 10,877.4 11,172.5 11,476.9 EBIT 42,429.5 44,840.3 47,581.5 49,458.7 Total other non-operating income 3,444.1 3,368.9 3,368.9 3,368.9 Associate contributions 5,576.0 3,000.0 2,500.0 2,000.0 Net interest income/(expense) (8,433.3) (8,303.9) (8,357.4) (8,077.6) Pre-tax profit 43,016.3 42,905.4 45,093.0 46,750.0 Tax (7,746.1) (7,981.1) (8,518.6) (8,950.0) Minorities (8,054.7) (8,054.7) (8,054.7) (8,054.7) Net profit 27,215.4 26,869.6 28,519.7 29,745.3 Net profit (adj.) 27,215.4 26,869.6 28,519.7 29,745.3 Balance Sheet (Btm) Year to 30 Sep 2024 2025F 2026F 2027F Fixed assets 298,704.2 341,754.7 355,073.3 368,323.3 Other LT assets 83,752.5 81,412.4 81,615.4 81,810.6 Cash/ST investment 54,123.4 53,989.5 76,049.7 99,364.3 Other current assets 91,012.8 90,325.3 93,649.4 96,846.2 Total assets 527,592.9 567,482.0 606,387.8 646,344.4 ST debt 64,419.6 66,941.4 66,941.4 66,941.4 Other current liabilities 44,360.9 39,101.1 40,540.1 41,923.9 LT debt 176,968.1 170,312.6 186,312.6 202,312.6 Other LT liabilities 12,789.3 12,957.1 13,433.9 13,892.5 Shareholders’ equity 149,208.3 162,244.2 175,179.6 189,239.0 Minority interest 79,846.7 115,925.5 123,980.2 132,034.9 Total liabilities & equity 527,592.9 567,482.0 606,387.8 646,344.4 Cash Flow Year to 30 Sep (Btm) 2024 2025F 2026F 2027F Operating 38,079.5 36,252.2 40,900.6 42,291.6 Pre-tax profit 43,016.3 42,905.4 45,093.0 46,750.0 Tax (7,746.1) (7,981.1) (8,518.6) (8,950.0) Deprec. & amort. 10,300.6 10,877.4 11,172.5 11,476.9 Working capital changes (7,902.5) (4,909.2) (2,461.3) (2,367.1) Non-cash items 411.2 (4,640.3) (4,385.0) (4,618.2) Other operating cashflows 0.0 0.0 0.0 0.0 Investing 1,487.1 (8,369.6) (10,898.7) (11,213.6) Capex (growth) (9,673.3) (10,877.4) (11,172.5) (11,476.9) Investments 64,750.1 0.0 0.0 0.0 Others (53,589.6) 2,507.9 273.8 263.4 Financing (31,737.8) (28,016.5) (7,941.8) (7,763.5) Dividend payments (15,074.9) (15,579.0) (15,584.4) (15,685.9) Issue of shares 0.0 0.0 0.0 0.0 Proceeds from borrowings 316.0 (4,133.6) 16,000.0 16,000.0 Others/interest paid (16,978.9) (8,303.9) (8,357.4) (8,077.6) Net cash inflow (outflow) 7,828.8 (133.9) 22,060.2 23,314.5 Beginning cash & cash equivalent 26,415.0 54,065.3 53,931.5 75,991.6 Changes due to forex impact (2,246.8) 0.0 0.0 0.0 Ending cash & cash equivalent 31,996.9 53,931.5 75,991.6 99,306.2 Key Metrics Year to 30 Sep (%) 2024 2025F 2026F 2027F EBITDA margin 15.5 16.2 16.4 16.5 Pre-tax margin 12.6 12.4 12.6 12.6 Net margin 8.0 7.8 8.0 8.0 ROA 4.8 4.9 4.9 4.7 ROE 12.9 17.3 16.9 16.3 Turnover 2.2 1.3 3.7 3.4 EBITDA 6.0 5.7 5.4 3.7 Pre-tax profit 4.3 (0.3) 5.1 3.7 Net profit (0.8) (1.3) 6.1 4.3 Net profit (adj.) (0.8) (1.3) 6.1 4.3 EPS (0.8) (1.3) 6.1 4.3 Debt to total capital 51.3 46.0 45.8 45.6 Debt to equity 161.8 146.2 144.6 142.3 Net debt/(cash) to equity 125.5 113.0 101.2 89.8 Interest cover (x) 6.3 6.7 7.0 7.5
