SINGAPORE (July 3): The worst is over for Thai Beverage in view of a marked recovery in Thailand’s beer consumption data, says RHB Research, which has maintained its "buy" rating on the counter with a $1.10 price target estimate.
In a Monday report, analyst Juliana Cai highlights a 5% and 10% y-o-y growth in Thailand’s beer sales for April and May this year, respectively, based on the latest statistics released by the Bank of Thailand.
This is a stark turnaround from the 17% y-o-y decline registered in Oct 2016, immediately after the passing of Thailand’s late King Bhumibol.
“We think this is a signal that beer consumption patterns in Thailand have normalised post-Songkran festival, and the mourning effects on beer sales are behind us. We expect the recovery to continue from here,” she adds.
While there is no market data on the spirits industry for reference, Cai thinks the recovery in beer consumption can be seen as proxy for the consumption of spirits as well.
“We anticipate the decline in spirit volumes to dissipate in 2H17. In addition, we note that agents stock up on spirits inventories in anticipation of a tax hike during January-March 2016, which resulted in strong sales number for ThaiBev in 2Q16,” states the analyst.
Cai is also expecting a similar restocking phase by agents given that a new excise tax rate is scheduled to be implemented in Sept 2017 – which she believes is an opportunity for ThaiBev to raise prices for its spirit products and experience gross margin expansion.
“We expect 2H17 to continue to see positive growth in beer volumes. According to management, ThaiBev has maintained its 40% market share in the beer segment as at April 2017. As such, we expect ThaiBev’s beer segment to perform in line with the market,” says Cai.
As at 10.13am, shares of ThaiBev are trading flat at 90 cents.
