Equity Analysis /

Siam Makro PCL: Cash & carry the 4Q22 driver

  • Cash & carry operation the 4Q22 earnings growth driver

  • Electricity and financial costs might drag 1H23 profit growth

  • Strong 2H23 earnings outlook

Bualuang Securities
23 January 2023

Although rising utilities and financial costs could be drags during the next few quarters, we still expect MAKRO, to achieve sales growth and look forward to a solid profit recovery in 2H23. Any stock price weakness would open a buying opportunity.

Cash & carry operation the 4Q22 earnings growth driver

We estimate MAKRO’s 4Q22 core profit at Bt2,457m, up by 3% YoY and 53% QoQ. Rising consumption should enable the makro cash & carry biz to mark SSSG of 9% and sales growth of 12%. We assume that makro’s sales rose faster than costs, so estimate its standalone 4Q22 core profit at Bt2,373m, up by 9% YoY and 51% QoQ. MAKRO’s subsidiary, Lotus’s, should post 4Q22 SSSG of 1.5% and rental income of Bt3,827m, up by 42% YoY and 15% QoQ. However, price promotions (which would have squeezed GM) and higher financial expenses (tied to a higher Libor) suggest only a thin 4Q22 profit for the Lotus’s operation (Figure 1).