UOB Kay Hian
Date of Report: 25 June 2025

Thai Beverage (THBEV SP): Navigating Competitive Pressures and Regulatory Shifts – Detailed 2025 Outlook

Overview: THBEV’s Position and Market Dynamics

Thai Beverage Public Company (THBEV) stands as Thailand’s largest beverage producer, dominating the spirits market and maintaining a strong presence in beer, non-alcoholic beverages, and food. As of the latest review, THBEV is navigating a landscape of intensifying competition, regulatory changes, and macroeconomic headwinds, all while leveraging cost advantages and strategic initiatives to sustain its market leadership.

• Share Price: S\$0.46
• Target Price: S\$0.45
• Upside: -2.2%
• Market Cap: S\$11,560 million (US\$9,022.1 million)
• 52-week Range: S\$0.595 – S\$0.425
• Major Shareholder: Charoen Sirivadhanabhakdi (65.9%)

Key Takeaways from THBEV’s Annual Information Meeting

THBEV is contending with increased competition in its core spirits segment, driven by anticipated regulatory changes and new market entrants. However, the group is poised to benefit from reduced molasses costs, a crucial raw material. The domestic beer segment is expected to achieve improved margins, while maintaining its lead in market share. Sabeco, THBEV’s Vietnamese beer subsidiary, faces challenges from stricter drink-driving laws and rising excise taxes. The much-anticipated BeerCo IPO remains on the table, with management waiting for more favorable macroeconomic conditions.

Spirits Segment: Mounting Competition and Margin Expansion Opportunities

• Rising Competition: The spirits division, particularly white spirits, is experiencing heightened competition due to potential new alcohol regulations and increased market participation.
• Strategic Response: THBEV is holding firm on average selling prices (ASPs) to defend its white spirits market share, and has introduced innovative products, including the premium single malt whisky ‘Prakaan’ and ready-to-drink spirits ‘Zato’.
• Cost Tailwinds: The group is securing molasses at approximately 20% better yields year-over-year, anticipating these cost benefits will start reflecting in higher margins by the first half of FY26.
• Brown Spirits Resilience: Sales volumes for brown spirits remain robust, providing a buffer against shifts in product mix and pricing pressures.

Beer Segment: Cost Reliefs and Market Leadership Amid External Pressures

• Input Cost Decline: Key malt prices have fallen by around 20% year-over-year, complemented by reductions in aluminium packaging costs, paving the way for improved margins in the second half of FY25.
• Market Share: THBEV maintains a 1.5 percentage point lead over its nearest domestic competitor, bolstered by active event branding and strong off-trade channel performance.
• Sabeco Challenges: Stringent drink-driving laws and higher excise taxes in Vietnam continue to weigh on Sabeco, which reported a 20% year-over-year drop in both revenue and earnings for 1Q25.
• Price Adjustments: Management plans to fully pass on the higher excise taxes to customers, raising beer prices by 2%, which is more moderate than previous mid-to-high single digit increase expectations.
• Downtrading Opportunity: With Sabeco’s beer portfolio priced below domestic peers, the brand is well-positioned to benefit from consumer downtrading during economic uncertainty.

BeerCo IPO and Strategic Partnerships

• IPO Status: The BeerCo IPO remains in the pipeline, with management waiting for improved macroeconomic conditions. The beer business is currently valued at US\$5 billion (8x FY25 EV/EBITDA).
• Strategic Alternatives: THBEV is exploring potential strategic partnerships to unlock shareholder value in BeerCo.
• Investments in FNN and Vinamilk: Management intends to keep stakes in Fraser & Neave (FNN) and Vinamilk listed, eyeing synergetic growth opportunities between the two entities.

Financial Performance and Forecasts

Segmental Outlook and Strategic Risks

Spirits: Recovery Timeline and Margin Outlook

• Volume growth in spirits is expected to remain modest in 2HFY25 due to a weak macroeconomic backdrop and softening domestic demand.
• Segment margins are anticipated to stabilize in 3QFY25 with lower advertising and promotion (A&P) spend, before improving in 4QFY25 as the benefits of lower-cost molasses are realized.
• Potential downside could arise from negative product mix shifts, as consumers may trade down from higher-ASP brown spirits to white spirits.

Beer: Navigating a Challenging Environment

• Outlook for the beer division is cautious for 2HFY25, particularly due to macroeconomic weakness impacting Sabeco’s sales volumes.
• Offsetting factors include higher domestic beer sales driven by the Songkran festival and increased tourist arrivals.
• Lower input costs and reduced A&P spending are expected to support beer segment margins in the coming quarters.

Valuation, Recommendation, and Share Price Catalysts

• Recommendation: HOLD maintained, with a sum-of-the-parts (SOTP) target price of S\$0.45.
• Valuation: All business segments are valued at peer-average 2025 EV/EBITDA multiples, except beer, which is valued at a 20% discount to peers.
• The current share price is seen as fair, with muted earnings growth and ongoing challenges likely to weigh on performance in the near term.

Potential Share Price Catalysts

• Gaining further market share in the beer segment.
• Strategic M&A activity or a potential BeerCo spinoff/IPO.
• Stronger-than-expected growth in the spirits segment.

Profit & Loss, Balance Sheet, and Cash Flow Summary

Conclusion: THBEV’s Strategic Outlook

THBEV remains a stalwart in Thailand’s beverage industry, leveraging its scale, brand equity, and cost advantages. Despite facing regulatory headwinds, fierce competition, and a challenging macroeconomic backdrop, the company’s focus on margin improvement, product innovation, and strategic initiatives positions it for resilience. Investors should monitor developments in the BeerCo IPO, raw material cost trends, and potential synergies with FNN and Vinamilk for future growth catalysts.

Disclaimer

This article is provided for general informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Investors are advised to consider their own financial situation and consult a financial adviser before making investment decisions.