And upside could come from corporate restructuring, M&As and beer market share gains, says analyst Jonathan Seow in a Tuesday report.
In its 2Q results review, Seow says initial expectations were for Thaibev to have a challenging quarter given the mourning period for its late king, made worse that 2Q is traditionally a seasonally strong quarter.
(See also: Thai Beverage posts 28% rise in 1Q earnings to $313 mil)
But while group sales declined 8% y-o-y as volumes fell, cost management led by lower A&P spend during mourning period and higher associates contribution lifted overall earnings.
“Accordingly, we view 1Q’s 28% y-o-y net profit growth as exceptionally strong,” says Seow.
Thaibev’s beer segment also surprised analysts. While 1Q’s beer volumes were down 7.6% y-o-y, a decrease in bottle and raw material costs lifted gross margins to 23.2%. Savings in A&P expenses also helped.
“Beer net profit was up a healthy 160% y-o-y. Ex-associates, beer now forms a meaningful about 20% of the group’s net profit,” says Seow.
Meanwhile, sales of spirits sales -- down 10.7% y-o-y -- continued to retrace and were entirely driven by volumes which were hit by the mourning period and postponement of festive and entertainment activities.
In addition, while the non-alcoholic segment is still in the red, losses have now narrowed to THB0.1 billion ($4.1 million).
Even as contribution by the non-alcoholic segment as group is still dwarfed by the much larger spirits and beer segments, we are positive that management should be able to achieve its EBITDA positive target this year, says Seow.
As at 11.26am, shares of ThaiBev are up 5 cents at 92 cents.
