Beer sales disappointed
- 1QFY9/24 revenue (-6% yoy) disappointed due to a weaker beer segment (-14% yoy). 1Q group EBITDA was +2% yoy on prudent cost management.
- Weak beer sales in 1Q suggest volume deterioration in TH while VN also remained weak; spirits sales resilient with ASP hike offsetting lower volumes.
- Downgrade to Hold. Valuations are undemanding, but we see risks for beer business with slow VN recovery and competitive threat from a new entrant.
1QFY9/24: Weak volumes, offset by cost savings
Th ai Beverag e’s (THBEV) 1QFY9/24 revenue declined 5.9% yoy while EBITDA rose 1.9% yoy. 1QFY24 topline disappointed at 26.5%/26.3% of our/Bloomberg consensus FY24F (note that 1Q is a seasonally stronger quarter, averaging 28.8% of FY19-23 revenues), with the beer segment being the key drag (-14.0% yoy). 1Q spirits segment revenue was flat (+0.5% yoy) as ASP increases offset volume decline ( -1.4% yoy), while the nonalcoholic beverages (+1.6% yoy) and food (+5.9% yoy) segments saw revenue growth. Due to its prudent cost management, THBEV saw positive EBITDA growth across all segments during the quarter.
Beer sales saw a steeper decline in 1QFY9/24
Beer segmen t’s reven ue d eclin e o f 14% yo y in 1QFY24 was steeper than the 6-8% yoy drop in the previous three quarters – we think this suggests a deterioration in Thailand volumes, while Vietnam volumes also remained weak. THBEV attributed the weaker beer volumes (-15% yoy) to a slower-than-expected economic recovery, but we think the weaker sales could also raise concerns over market share impact as this coincided with the launch of beer products by new entrant Tawandang 1999 (Unlisted) in Thailand. In Vietnam, THBEV’s subsid iary SABECO saw muted sen timen t from pre-Tet sales in Jan 2024, with distributors reluctant to carry more inventories. However, management is cautiously optimistic on a 2HCY24F recovery in Vietnam after a challenging CY23, riding on 1) macroeconomic recovery, 2) cost efficiencies across production and A&P spend, and 3) consolidation of associate breweries (expected in 2QCY24F by SABECO).
Downgrade to Hold
While THBEV’s valuations are undemanding (trading at -1.5 s.d. vs. its historical average P/E since IPO), we downgrade the stock from Add to Hold as we see FY9/24F risks from the beer segment with a slow recovery in Vietnam, and potential competitive threat from Tawandang in Thailand. We note that the earlier announced alcohol excise tax cuts in Jan 2024 by the Thai government are n o t ap p licable to THBEV’s sp irits p ro ducts (limited to local liquors with alcohol content below 7%) . Our SOP-based TP is lowered to S$0.50 on a lower EV/EBITDA multiple for its Thai alcohol segments. Upside risks : better-thanexpected EBITDA margins on lower input costs and cost control. Downside risks include prolonged weakness in the Thai and Vietnam macroeconomic environment dampening its sales volumes, and higher-than-expected SG&A spend hurting margins.
