Broker: CGS International
Date of Report: August 15, 2025

Thai Beverage Shines with Margin Expansion Amid Regional Headwinds: In-Depth Sector Analysis and Peer Benchmarking

Introduction: Resilience and Innovation in Southeast Asia’s Beverage Sector

Thai Beverage (THBEV), a leading distiller and vintner in Southeast Asia, demonstrated notable resilience in its latest quarterly results. Despite facing challenging macroeconomic conditions and sluggish consumer demand, especially in key markets like Vietnam and Thailand, the company managed to deliver margin improvements and maintain robust operational performance. This article provides a comprehensive breakdown of THBEV’s recent results, sector positioning, competitive benchmarking, and ESG commitments, as well as peer performance in the broader spirits, beer, and non-alcoholic beverage space.

3QFY25 Performance: Margin Expansion Offsets Revenue Decline

– THBEV’s 3QFY25 revenues fell 3.4% year-on-year to THB81.0 billion. – Despite the revenue drop, EBITDA remained stable at THB13.9 billion (-0.9% yoy), backed by a 45bp margin improvement to 17.2%. – The margin expansion was attributed to: – Favorable sales mix shift to higher-margin spirits. – Lower input costs for beer. – Partially offset by startup losses from Fraser & Neave’s new dairy farm in Malaysia.

Spirits Segment: Volume Recovery and Premiumisation Drive Growth

– Spirits revenue grew 3.5% yoy in 3QFY25 after declines in prior quarters. – Estimated 2% yoy increases in both volumes and average selling price (ASP). – Segment EBITDA margin expanded 20bp yoy, reversing a 200bp decline in 1HFY25. – The company’s premiumisation strategy, emphasizing new brands and international brown spirits, contributed to higher ASPs and margins.

Beer Segment: Vietnam’s Mixed Impact and Margin Improvement

– Beer revenues declined by 7.0% yoy, impacted by: – Muted consumer demand in Vietnam. – 12% yoy depreciation of the Vietnamese dong (VND) against the Thai baht (THB). – Beer volumes were estimated broadly flat yoy in 3QFY25. – Industry data shows Vietnam beer production volumes rose 7% yoy in Jun-Jul 25 as earlier destocking unwound. – No negative impact reported from a 2% ASP increase in July 25. – Beer segment margin improved 90bp yoy to 14.5%, supported by: – Low-cost malt inventory. – Synergies from SABECO’s acquisition of Sabibeco. – Further integration benefits are anticipated in upcoming quarters.

Non-Alcoholic Beverages and Food Segments: Ongoing Challenges

– Non-Alcoholic Beverages (NAB) revenues declined 6.9% yoy; food segment revenues dropped 5.5% yoy in 3QFY25. – NAB segment EBITDA fell 15.7% yoy; food EBITDA decreased 35.7% yoy, reflecting continued headwinds.

Financial Snapshot: Key Figures and Estimates

Segment Operating Statistics: Quarterly and YTD Trends

• Spirits sales volumes in 3QFY25: 146.0m litres (+1.7% yoy), ASP: THB 193.6/litre (+1.8% yoy).
• Beer sales volumes: 576.3m litres (-0.4% yoy), ASP: THB 52.6/litre (-6.6% yoy).
• NAB and food segments saw declines in both revenue and EBITDA margins.

Shareholder and Valuation Snapshot

• Current Price: S\$0.475
• Target Price: S\$0.56 (17.9% upside potential)
• Market Cap: S\$11.9bn (US\$9.3bn)
• Dividend Yield: 5.4%
• Free Float: 29.3%
• Major Shareholders: Sriwana Co Ltd (56.8%), Maxtop Management Corp (7.1%), Capital Group (5.0%)

Peer Benchmarking: Spirits, Beer, and Non-Alcoholic Beverages

Simple Average (Spirits): 18.0x P/E, 11.5x EV/EBITDA, 20.9% ROE, 4.0% Yield

Similar benchmarking is provided for beer and non-alcoholic beverage peers, showing THBEV’s competitive edge in valuation, profitability, and dividend yield.

ESG Commitment: Sustainability at the Core

– THBEV scored a B+ on the LSEG ESG Combined Score. – Achievements: – Reduced water intensity by 5.33% and GHG Scope 1 & 2 emissions by 5.12% in FY9/24. – 97% of glass packaging sold in Thailand was reused/recycled in FY9/24, with a target of 100% by FY9/25. – Ambition to reduce GHG emissions by 42% and use at least 50% renewable energy by FY9/30. – The company has been included in the DJSI Emerging Markets and DJSI World Indices for eight and seven consecutive years, respectively. – No ESG premium/discount is currently applied in fundamental valuations, but strong ESG execution may attract more sustainability-focused funds.

Balance Sheet and Cash Flow: Solid Foundations

• Total cash and equivalents projected at THB54.1bn for FY24A, declining slightly as investments ramp up.
• Steady capex allocation, with free cash flow to equity forecast to remain healthy above THB26bn annually through FY27F.
• Net gearing elevated, peaking at 78.6% in FY24A, but forecast to improve as earnings and cash flow strengthen.

Key Risks and Catalysts

• Risks: – Prolonged macroeconomic weakness in Vietnam and Thailand could pressure sales volumes and margins. – Higher SG&A costs could weigh on profitability.
• Catalysts: – Stronger margins from cost controls. – Volume uplift from downtrading trends in Vietnam.

Strategic Outlook: Maintain Add Rating with Upside Potential

– THBEV’s current valuation (~10x forward P/E) largely prices in macroeconomic headwinds. – The broker reiterates an Add rating with a sum-of-parts-based target price of S\$0.56, implying ~18% upside. – Forecasts: 8% core EPS CAGR for FY25-27F and a consistent 5.4% dividend yield.

Conclusion: Thai Beverage Remains a Defensive Play in Uncertain Times

Despite near-term consumption headwinds and FX volatility, Thai Beverage’s focus on premiumisation, cost discipline, and sustainability positions it as a resilient and attractive investment in the regional beverage space. With robust margins, strong ESG credentials, and a commitment to shareholder returns, THBEV continues to stand out among global peers.