Equity Analysis /
Thailand

CP All: Heavy store traffic should outweigh inflation effects

  • Strong traffic recovery should outweigh inflation effects in 2Q22

  • CPALL should be able to manage higher interest rates

  • Reopening and rising market share to drive earnings growth

Bualuang Securities
11 July 2022

Following Thailand’s reopening and CPALL building market share, we expect the firm to report solid YoY and QoQ profit growth for 2Q22. Looking further ahead, although inflation might squeeze effective consumer purchasing power modestly and push up costs, we expect heavier 7-Eleven store traffic to generate economies-of-scale. BUY!

Strong traffic recovery should outweigh inflation effects in 2Q22

We estimate CPALL’s 2Q22 core profit at Bt3,739m, up by 48% YoY and 7% QoQ, driven by SSSG of 12.5%. Although we assume that spending/ ticket will be marked flattish YoY at Bt82, the swift recovery in tourist arrivals (Figure 5), post-restriction behavioral normalization (more outdoor activity), and a rising 7-Eleven market share would have fueled substant-ially heavier traffic to stores (we assume 925 customers/store/day; Figure 3-4). Higher fuel costs would have squeezed distribution center margin and broader cost-push inflation would have dampened 2Q22 GM, but our model still points to YoY and QoQ operating profit expansion, driven by strong growth in sales and other income (details in Figure 9).