Equity Analysis /

Siam Makro PCL: Looking beyond the Lotus’s acquisition

  • Strong earnings growth outlook for 2H22 onward

  • makro + Lotus’s will dominate grocery retail over the long haul

  • Re-initiate coverage with a BUY call to a target price of Bt48

Bualuang Securities
17 March 2022

We have re-initiated coverage on MAKRO with a BUY call to a DCF-derived YE22 target price of Bt48. We like MAKRO for its dominant position in cash&carry space and diverse customer base. Although the consolidation of Lotus’s will squeeze EPS in 2022 (stock dilution from the PO and debt-servicing costs), we expect synergy-building and hefty earnings growth over the longer haul. Our forecast 2023-24 EPS CAGR is 40%.

Strong earnings growth outlook for 2H22 onward

For 2022, we expect MAKRO’s core makro-branded branch network to mark a solid demand recovery among HoReCa customers (25-30% of revenue) and sales growth to shoppers in trading-down mode (tighter household budgets are prompting bulk-buying and heavier purchases of private labels). Our channel check indicates modest YTD SSSG for makro.