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).