ThaiBev is expected to return to earnings growth in FY2024 with the recovery in the performance of its beer business in Vietnam, which was “muted” after a “dismal” FY2023. Sabeco, ThaiBev’s brand in Vietnam, is also “uniquely positioned” to weather the short-term consumer weakness in Vietnam given its mainstream brand positioning. The analysts also expect to see an uplift in earnings from the optimisation of advertising and promotion (A&P) spending.
“We expect to see growth in volume and an earnings recovery towards 2HFY2024 and pencilled in 8% top-line and 15% patmi growth in FY2024 (back to 2018 level of profitability, but only at 80% of FY2022’s record profit),” write Sim and Chee.
In addition, they believe ThaiBev’s spirits and beer business in Thailand will continue to perform. DBS’s economist has projected Thailand to see a boost in economic growth to 3.8% in 2024 from 2.8% in 2023 with a boost from the 500 billion baht ($19.1 billion) digital wallet scheme.
Meanwhile, Sim and Chee have kept their “buy” call with a lower target price of 75 cents, down from 86 cents previously to account for the higher equity risk premium. “We valued the company using a sum-of-the-parts (SOTP) methodology with revised assumptions of a higher discount rate. Our target price also equates to ThaiBev’s average 15-year historical 12-month forward P/E, at 15.8x.”
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At its last-traded share price of 52.5 cents as at Nov 17, the analysts deem ThaiBev’s current valuation as “unjustifiably low” at -2 standard deviation (s.d.) of its 15-year historical forward P/E low despite the group’s consistent earnings growth. As such, investors should load up on the stock before its price increases.
As at 4.14pm, shares in ThaiBev are trading 2 cents higher or 3.81% up at 54.5 cents.
