Spirits sales revenue for the quarter fell by 4.8% y-o-y to 32.24 billion baht as total sales volume fell by 6.2% y-o-y, which is the weakest in eight quarters. “We believe [the lower spirits volume] is in part due to overstocking in the prior quarter,” Chew writes.
Excluding seasonal effects, sales volumes for spirits have been declining from an annualised 690 million litres in 3QFY2021 to 630 million litres, which is the lowest seen since nearly six years ago, Chew adds.
Despite the downgrade, the analyst believes FY2025 will be a “year of recovery” mainly from improving macro conditions and government spending.
He expects ThaiBev’s gross margins during the year to remain “stable” with pressure only from aluminium cans.
See also: OCBC may outperform in near term following removal of GEH overhang: Citi
Costs from malt and molasses will be “refreshed” with lower-cost inventory although operating margins may remain under pressure from competitive advertising and promotional spending, Chew observes.
Chew has also lowered his target price estimate to 56 cents from 64 cents previously due to a lower target FY2025 P/E multiple of 12 times from 14 times previously, or back to a four-year average forward P/E.
“We believe the sluggishness of earnings and modest improvement in consumer spending will keep valuation multiples depressed. Spirit volumes have been on a declining trend for the past three years,” he notes.
As at 10am, shares in ThaiBev are trading 0.5 cents lower or 0.98% down at 50.5 cents.
