Monday 19 May 2014

Thai Beverage PLC

OCBC on 15 May 2014

Despite Thailand’s political unrest scaling up in 1Q14, Thai Beverage PLC (ThaiBev) has shown earnings resilience. 1Q14 revenue increased 4.8% YoY to THB41.0b, in-line with expectation as it forms 25.1% of our FY14 forecast. Due to better-than-expected gross profit (GP) margin, PATMI increased 72.9% to THB6.0b, making up 30.2% of our expectation. Alcoholic segments retain market shares while competition caused sales volume drop in non-alcoholic beverage segment. We revise the GP margins for beer and spirits segments upwards to take into account the higher ASP post-excise tax increase. We maintain BUY with a slightly higher TP of S$0.74.

GP margin surprise in 1Q14 results
Despite Thailand’s political unrest scaling up in 1Q14, Thai Beverage PLC (ThaiBev) has shown earnings resilience. ThaiBev’s 1Q14 revenue increased 4.8% YoY to THB41.0b, in-line with expectation as it forms 25.1% of our FY14 forecast. Due to better-than-expected gross profit (GP) margin, PATMI increased 72.9% to THB6.0b, making up 30.2% of our expectation. The better GP margin came from beer and spirits segments. In 1Q14, beer’s GP margin was 18.9% (vs. 13.1% in 1Q13) while spirits’ GP margin was 33.5% (vs. 32.0% in 1Q13). The higher GP margins are due to raising average selling price (ASP) more than the increase in excise tax in 4Q13. On a QoQ basis, the GP margins for beer (vs. 15.3% in 4Q13) and spirits (vs. 32.6% in 4Q13) segments were also better as pre-excise tax increase inventory were sold without the higher ASP in Oct-13. 

Alcoholic segments retain market shares
In 1Q14, spirits sold was flat YoY at 141m litres. However, there was a shift in product mix from brown to white spirits, which is more profitable due to a lesser need for advertisements and promotions. Beer volume, on the other hand, dropped by 11.7% YoY to 144m litres. Nevertheless, ThaiBev’s beer market share is still ~30% as the overall beer market had shrunk by the same degree after excise tax increase last year.

Non-alcoholic beverage facing competition
In 1Q14, non-alcoholic beverage sales decreased by 22.1% YoY to THB3.7b, mainly due to competition that caused sales volume drop. Sermsuk product sales decreased 7.7% to 215.3m while sales volume of Oishi beverages dropped 16.0% to 57.8m litres. Going forward, ThaiBev will be working together with its subsidiaries (i.e. Oishi and Sermsuk) to extend one another’s distribution.

Revise GP margin upwards; new TP S$0.74
We revise the GP margins for beer and spirits segments upwards to take into account the higher ASP. We maintain BUY with a slightly higher TP of S$0.74 (previous S$0.73).a

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