"With the beer sector already facing a challenging outlook, we reckon that Thai Beverage is likely to fully pass on the higher excise tax to consumers, resulting in softer beer volumes," state the analysts in their June 16 note, where they have kept their "hold" call.
Tan and Mo point out that the beer sector in Vietnam already suffering from low volumes due to stringent drink-driving laws introduced in 2019.
"Coupled with changing domestic preferences, we reckon that the higher alcohol tax would negatively impact beer consumption volumes in the medium-long term, affecting beer producers such as ThaiBev's Vietnam subsidiary, Sabeco.
In FY2025, Sabeco accounted for 15% of ThaiBev's revenue and 7% of its patmi.
"Furthermore, as the ongoing global macroeconomic uncertainty persists, we expect weakening domestic demand to stay muted or soften, leading to lower revenue and profitability for domestic beer producers," they warn.
Tan and Mo expect ThaiBev, in a bid to protect its margins, to fully pass on the higher tax to consumers, risking lower volume.
Nonetheless, ThaiBev may enjoy better domestic sales, driven by increasing tourist arrivals. In addition, the company has secured raw materials at lower prices and is curbing marketing spend.
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Overall, they remain pessimistic about ThaiBev's beer business, which the company is mulling a spin-off listing for years.
Elsewhere, the recovery of ThaiBev's spirit, its other key business segment, is not expected to enjoy a recovery till later this year, and even so, at a low single-digit y-o-y pace.
The analysts attribute this to macro-economic environment and a weakening domestic economy.
"Potential downside may come from an unfavourable product mix, driven by downtrading of the higher-ASP brown spirits to white spirits," they warn.
To reflect these changes, Tan and Mo have maintained their FY2026 patmi forecast and have lowered FY2027's by 1%.
Their revised target price of 45 cents, down from 51 cents previously, is on the back of lower valuations for most of its business segments given the lower pegged EV/EBITDA peer multiples since their last update.
"In our view, we reckon that ThaiBev remains fairly valued at current price levels. We opine that muted earnings growth, dragged by a challenging outlook, would weigh on share price performance," state Tan and Mo.
Thai Beverage shares changed hands at 46 cents as at 10.23 am.
