Over FY2022 to FY2024, ThaiBev’s spirits volumes fell by a compound annual growth rate (CAGR) of 2%. With this, Tiruchelvam has lowered his outlook to low-single-digit volume growth, down from the mid-single-digit recovery previously.
He sees limited headroom for pricing with growth for average selling prices (ASPs) expected to slow to around 1% to 2% per year, which is insufficient to offset cost pressures. Given this, ebitda margins for ThaiBev’s spirits business are unlike to expand “meaningfully” over FY2025 to FY2027.
Thailand’s tighter alcohol regulations across advertising, sponsorships and point-of-sale visibility, have also led Tiruchelvam to lower his BeerCo volumes estimates to mid-single-digit growth, from the previous forecast of 6% to 12% growth annually. He adds that he sees margin upside capped for the beer business.
With a risk that the government may reimpose restrictions on afternoon alcohol sales, the analyst has lowered his volume forecasts for spirits and beer in the core Thai market by 15% over FY2026 to FY2027.
In FY2026, the analyst sees the possibility of ThaiBev cutting its dividends by 15% to 20%, reducing its forward yield to 4%. This would mark a contrast to its consistent dividend policy so far, thanks to stable cash generation and contributions from key subsidiaries such as SABECO.
While recent dividends show management’s confidence in the group’s underlying cash flows, payout sustainability will remain linked to operating performance and leverage trends. “Over the medium term, ThaiBev’s ability to sustain dividends while funding strategic initiatives will be an important driver of shareholder returns,” he says.
He adds that market expectations for ThaiBev to spin-off its beer business has faded with investors increasingly discounting the initial public offering (IPO) entirely, which limits ThaiBev’s ability to unlock value or support higher payouts.
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This could change, however, after Kitipong Urapeepatanapong, the chairman of the Stock Exchange of Thailand (SET), said the SET may welcome alcohol beverage listings. He adds that ThaiBev, as well as its peers, are good prospects for new listings.
To Tiruchelvam, ThaiBev's valuations appear "demanding" at FY2025 P/E of 9.9 times and 6.4 times EV/Ebitda.
“There is slowing growth, rising regulatory risk and a weakening dividend outlook,” he says.
In addition to his downgrade, the analyst has lowered his target price to 39 cents from 72 cents previously.
Shares in ThaiBev closed flat at 46.5 cents on Jan 7.
