Strong rebound post lockdown
? THBEV saw a strong rebound in 1QFY22 as its key geographies emerged from lockdown – revenue/EBITDA rose 59%/94% qoq.
? We are confident of continued recovery as the economy reopens further; price hikes and prudent cost management should help uphold its margins.
? Reiterate Add and TP of S$0.91; THBEV is our sector top pick as we believe it is a laggard recovery play.
1QFY22: Strong rebound post lockdown
THBEV’s 1QFY9/22 revenue rose to THB77.1bn (+59.4% qoq, +7.4% yoy), reflecting a strong recovery as its key operating geographies Thailand and Vietnam emerged from lockdowns. All its four segments recorded positive revenue growth both on a qoq and yoy basis, with the alcoholic segments (spirits and beer) surpassing their pre-Covid (1QFY20) sales performance. 1QFY22 EBITDA rose to THB14.7bn (+93.6% qoq, +1.6% yoy), led by margin improvements in the non-alcoholic beverages (NAB) and food segments, while spirits and beer segments saw margins contracted slightly on a yoy basis. Overall, we deem the results as above expectations, with 1QFY22 EBITDA forming 30.6% of our and 32.2% of Bloomberg consensus full-year forecast.
Further recovery in sight with economic reopening
With Thailand’s entertainment venues still shut, we expect THBEV’s spirits volume to remain resilient in 2QFY22F, supported by its off-premises consumption nature. Meanwhile, we expect Sabeco (THBEV’s Vietnam beer unit) to lead the volume recovery for its beer segment given the faster pace of reopening in Vietnam – entertainment venues in Ho Chi Minh City have already reopened on 10 Jan, and Vietnam continues to gear up to reopen its borders by end-Mar as part of its “living with Covid” policy.
Cost pressures well managed
THBEV has adjusted the pricing for selected SKUs of its white spirit portfolio in Oct, and Vietnam beer portfolio in Dec to manage cost pressure; we believe this will help it cushion the higher input costs. THBEV also notes that cost of molasses in the current season is likely to be lower yoy, and it has forward buying in place to manage other raw material costs. Meanwhile, its rising packaging costs are also being mitigated by measures to encourage a higher recycling rate of bottles.
Reiterate Add and TP of S$0.91
Reiterate Add and SOP-based TP of S$0.91; THBEV remains our consumer sector top pick as we believe it is a laggard recovery play – it trades at an undemanding valuation of 13.7x CY22F P/E (1.4 s.d. below its 10-year historical mean), below regional peers’ 27.5x. Potential re-rating catalysts include stronger volume recovery and successful BeerCo listing. Downside risks include higher-than-expected input costs pressuring margins.