Equity Analysis /
Thailand

Osotspa PCL: Consequences of M-150 price rise

  • Earnings forecast cuts

  • Turbulence in Thai energy drinks market

  • Functional drinks and personal care sales continue growing

Bualuang Securities
17 August 2022

The market share and sales of OSP’s M-150 energy drink declined in 2Q22 after it hiked its sales price in Mar 2022. We believe this effect will persist into 2H22, so have cut our profit forecasts by 9% for 2022 and 3% for 2023—we now assume a slimmer GM (lower expectations for sales of fat-margin energy drinks) and higher SG&A expenses. Despite our forecast cuts, our BUY call stands, premised on an inexpensive valuation and a 3.8% dividend yield.

Earnings forecast cuts

After joining OSP’s 2Q22 analyst meeting last week, we believe market concerns over OSP’s falling energy drink market share and sales will persist into 2H22. Management expects energy drink sales to rise QoQ in 3Q22, but we are skeptical. Our earnings forecasts downsize by 9% for 2022 and 3% for 2023—we now assume a slimmer GM (diminished expectations for sales of fat-margin energy drinks) and higher SG&A expenses. But our DCF-based YE22 target price is unchanged at Bt38 and our BUY call stands, premised on an inexpensive 2022 PER of 35x (0.6x above its four-year average) and a 3.8% dividend yield.