Distillers & Vintners May 13, 2025 Thai Beverage: Navigating Demand Volatility with Steady Progress Thai Beverage’s 1HFY9/25 Performance Thai Beverage (THBEV) reported a 1HFY9/25 PATMI of THB14.7bn, a 3.2% year-over-year decrease, aligning with expectations at 55% of the FY25F estimate [[1]]. However, revenue of THB177.6bn, a 1.0% year-over-year increase, fell short of expectations [[1]]. An interim dividend remained unchanged year-over-year at THB0.15, yielding a 5% FY25F dividend yield [[1]]. The “Add” rating is reiterated, but the target price is lowered to S\$0.56 [[1]]. Detailed Financial Analysis 1HFY9/25 PATMI: THB14.7bn (-3.2% yoy), in line at 55% of our FY25F estimate but missed Bloomberg consensus at 49% (FY19-24 average was c.56%) [[1]]. 2QFY25 Revenue: THB85.4bn (-0.6% yoy), bringing 1HFY25 revenues to THB177.6bn (+1.0% yoy), behind expectations [[1]]. 2QFY25 EBITDA: Fell 7.6% yoy to THB14.7bn due to higher input and marketing costs for spirits [[1]]. Beer and NAB Sales: Saw decent sales growth of c.3.0% each yoy in 1HFY25 as stocking for an earlier Tet season was largely captured in 1QFY25 [[1]]. Spirits Revenue Decline: Narrowed to 1.5% yoy in 1HFY25 (1QFY25: -4.8%) due to improved volumes in 2QFY25 [[1]]. Beer Sales Analysis Group beer revenue fell 2.4% year-over-year in 2QFY25 [[1]]. Strong ex-SABECO beer volumes increased by 14.3% year-over-year but were offset by lower ASPs and weak Vietnam sales [[1]]. Market share recovery in Vietnam was observed in March, following a weak January-February due to early Tet stocking [[1]]. SABECO guided for a 1% revenue decline in FY25F at its AGM in April [[1]]. FY25F beer volumes are now forecasted to grow approximately 5% year-over-year, revised down from approximately 7% previously, due to subdued customer sentiments in Thailand and Vietnam [[1]]. Spirits Sales Performance Spirits sales picked up 2.1% year-over-year in 2QFY25, driven by a 2.6% rise in volumes compared to a 6.3% year-over-year decline in 1QFY25 [[1]]. The spirits business is closely linked to the local economy, which is likely to remain sluggish in FY25F [[1]]. Roughly flat FY25F spirits revenues are projected [[1]]. Cost Management and EBITDA Margins Beer EBITDA margin held broadly stable year-over-year at 12.4% in 2QFY25 [[2]]. Malt inventory was secured at approximately 20% year-over-year lower prices for FY25F, offsetting a one-off fair value loss from SABECO’s investment in an associate [[2]]. Spirits EBITDA margin declined 1.8% points year-over-year to 23.9% due to marketing for new products and elevated input costs as THBEV worked through higher-priced molasses inventory [[2]]. EBITDA margins of 17.5-18% are now forecasted for FY25F-27F, revised down from the previous 18-19% [[2]]. Investment Recommendation The “Add” rating is reiterated, expecting THBEV to return to earnings growth in FY26F [[2]]. The SOP-based TP is lowered to S\$0.56 due to trimming FY25F/26F EPS by 0.7-3.3% to reflect slow recovery amid macroeconomic headwinds [[2]]. The stock trades at 10.4x forward P/E, approximately 1.5 standard deviations below its 5-year mean [[2]]. Re-rating catalysts include stronger margins from tighter cost controls and volume uplift from downtrading in Vietnam [[2]]. Downside risks include prolonged macroeconomic weakness impacting sales volumes and lower margins from higher SG&A [[2]]. Key Changes and Financial Summary FY25F-27F EPS reduced by 0.7-4.9% [[2]]. Financial Summary Sep-23A Sep-24A Sep-25F Sep-26F Sep-27F Revenue (THBm) 332,931 340,289 350,970 365,663 377,725 Operating EBITDA (THBm) 58,969 61,650 61,288 65,817 67,514 Net Profit (THBm) 27,434 27,216 26,476 29,875 30,920 Core EPS (THB) 1.09 1.08 1.05 1.19 1.23 Core EPS Growth (8.9%) (0.8%) (2.7%) 12.8% 3.5% FD Core P/E (x) 12.08 12.18 12.52 11.10 10.72 DPS (THB) 0.60 0.62 0.65 0.65 0.65 Dividend Yield 4.55% 4.70% 4.93% 4.93% 4.93% EV/EBITDA (x) 8.12 8.41 8.25 7.46 7.00 P/FCFE (x) 9.27 8.02 12.30 11.80 9.57 Net Gearing 56.0% 78.6% 73.6% 67.8% 59.9% P/BV (x) 1.65 2.22 2.08 1.92 1.77 ROE 13.5% 15.5% 17.2% 18.0% 17.2% % Change In Core EPS Estimates (0.72%) (3.29%) (4.87%) EPS/Consensus EPS (x) 0.88 0.91 0.91 Major Shareholders Sriwana Co Ltd: 56.8% [[2]] Maxtop Management Corp: 7.1% [[2]] Capital Group Companies: 5.0% [[2]] Analyst Information Meghana KANDE [[2]] LIM Siew Khee [[2]] Thailand’s Liquor Sales Volumes Monthly domestic white liquor and mixed liquor sales volumes in Thailand were examined [[2]]. Thailand’s Beer Market Dynamics Monthly domestic beer sales and production volumes in Thailand were analyzed [[3]]. Vietnam’s Beer Production Monthly domestic beer production volumes in Vietnam were assessed [[3]]. Earnings Revision Analysis Analysis of revenue, gross profit, EBITDA, operating profit, net profit, and core EPS revisions [[4]]. Sum-of-Parts (SOP) Valuation THBEV’s SOP-based valuation was conducted [[4]]. Historical P/E and P/BV Trends Historical P/E (x) and P/BV (x) trends were examined [[4]]. Peer Comparison A peer comparison was performed, evaluating spirits, beer, and non-alcoholic beverage companies [[5]]. Key metrics included price, target price, market cap, P/E, EV/EBITDA, P/BV, recurring ROE, dividend yield, and 2-year EPS CAGR [[5]]. Company Ticker Recom. Price (lcl curr) Target Price (lcl curr) Market Cap (US\$ m) CY25F Core P/E (x) CY26F Core P/E (x) 2-year EPS CAGR (%) EV/EBITDA (x) P/BV (x) Recurring ROE (%) Dividend Yield (%) Thai Beverage THBEV SP Add 0.52 0.56 9,908 12.1 11.0 8.6% 2.04 1.88 17.5% 4.9% Carlsberg Brewery (M) CAB MK Add 19.24 23.5 1,368 16.1 15.2 9.0% 18.1 16.9 120.4% 6.2% Heineken Malaysia Bhd HEIM MK Add 27.62 31.9 1,940 17.3 16.6 5.1% 15.5 15.5 89.5% 5.8% ESG Initiatives and Performance THBEV demonstrates a commitment to ESG through continuous innovation in energy and water management, as well as packaging and waste reduction [[6]]. Water intensity reduced by 5.33% year-over-year, and greenhouse gas (GHG) Scope 1 and 2 emissions decreased by 5.12% (with FY9/23 as the base year) [[6]]. 97% of glass packaging sold in Thailand was reused and recycled in FY9/24 [[6]]. Targets include reducing water intensity by 7% by 2030 and GHG Scope 1 and 2 emissions by 42% by FY9/30F (with FY9/23 as the base year) [[6]]. Commitment to using at least 50% renewable energy by FY9/30F [[6]]. ESG Highlights and Implications Reused/recycled 97% of glass packaging products sold in Thailand in FY9/24, with a goal of 100% retrieval for reuse or recycling by FY9/25 (FY9/30 for PET bottles and aluminum cans) [[6]]. Inclusion in the DSJI Emerging Markets and DJSI World Indices for eight and seven consecutive years, respectively [[6]]. Achieved a full score (100/100) for 6 of 27 criteria within the Environmental, Social, and Governance sections in S&P Global’s ESG scores [[6]]. A 5.12% decrease in absolute scope 1 and scope 2 emissions from FY9/23 levels was achieved in FY9/24 [[6]]. Financial Metrics and Ratios Analysis of P/BV vs ROE and 12-month Forward FD Core P/E vs FD Core EPS Growth [[7]]. Detailed breakdown of Profit & Loss, Cash Flow, and Balance Sheet items [[7]]. Key ratios including Revenue Growth, Operating EBITDA Growth, Operating EBITDA Margin, Net Cash Per Share, BVPS, Gross Interest Cover, Effective Tax Rate, and Net Dividend Payout Ratio [[8]]. Examination of Accounts Receivables Days, Inventory Days, Accounts Payables Days, ROIC, ROCE, and Return On Average Assets [[8]]. Key Drivers: Spirit volume, Beer volume, and Non-alcoholic beverage volume [[8]].
