RHB on Friday (Feb 16) cut its target price on Thai Beverage (ThaiBev) to S$0.76 from S$0.82, after revising its earnings estimates for FY2024 to FY2026.
The research team reduced its net profit forecasts by 2 to 5 per cent for the period, after accounting for the group’s lower-than-expected revenue and earnings for the first quarter ended Dec 31, 2023.
On Wednesday, the mainboard-listed beverage group posted a 5.9 per cent drop in sales revenue for Q1 to 76.1 billion baht (S$2.8 billion). This came as ThaiBev’s beer segment revenue dropped 14 per cent on lower sales volume and slower-than-expected economic recovery in Thailand and Vietnam.
Earnings before interest, taxes, depreciation and amortisation (Ebitda), however, was up 1.9 per cent to 13.8 billion baht due to “effective cost management”, according to a business update.
“Even though Q1 2024 earnings missed estimates, we anticipate consumption recovery in Thailand and Vietnam to come through, delivering earnings growth in the latter part of the year,” RHB said.
It lowered its forecasts for FY2024-26 revenue and Ebitda to factor in weak sales in the beer business, offset by better margins on favourable raw material costs and cost management. Still, it expects earnings to grow by 3 to 5 per cent yearly.
The research team remains positive on the counter due to “strong market leadership” in Thailand and Vietnam, and believes ThaiBev could be a beneficiary of the economic recovery in both countries.
Both RHB and DBS Group Research view ThaiBev’s valuation to be attractive and maintained “buy” on the beverage maker.
The stock is trading at 11 times RHB’s estimates for FY2024 earnings, at around two standard deviations below ThaiBev’s historical forward mean of 19 times, RHB said.
DBS noted that ThaiBev is trading at its Covid low in March 2020, even though FY2023 profits were 18 per cent higher than pre-Covid levels.
It had a S$0.72 target price on the counter, implying a price-to-earnings (PE) ratio of 15.9 times, which is ThaiBev’s average 15-year historical 12-month forward PE.
The target also implies a potential 45.5 per cent upside from ThaiBev’s last trading price of S$0.495 as at 10.36 am on Friday. RHB’s S$0.76 target price, meanwhile, implies a potential upside of 53.5 per cent.
“We expect to see sequential year-on-year improvement in its revenue and profits on the back of improving macroeconomic conditions in Thailand and Vietnam,” DBS said.
