Equity Analysis /

Siam Makro PCL: Revenue and expenses normalizing!

  • 2022 to prove the earnings trough

  • Strong earnings recovery in 2023

  • Refinancing in-progress

Bualuang Securities
15 September 2022

Although the weak 2022 earnings outlook and the overhanging possibility of MAKRO acquiring Metro India may squeeze its stock price, our BUY call stands to a trimmed YE22 target price of Bt42. We expect earnings to trough this year, then expand robustly in 2023, supported by normalized revenue and expenses.

2022 to prove the earnings trough

Cost-push inflation is squeezing the margins of both makro and Lotus’s, as demand among mid- to low-income demographics is recovering only slowly. Expenses tied to Lotus’s constitute the key drag on MAKRO’s 2022 earnings profile. During 1H22, despite swift makro SSSG and a 107% YoY jump in revenue with the consolidation of Lotus’s, MAKRO’s core profit grew by only 20% YoY, due mainly to much faster growth in operating costs. Looking to 2H22, earnings will remain under pressure, due to rising costs (3Q22 is likely to be the weakest quarter, followed by a QoQ recovery in 4Q22). Hence, we have cut our 2022 profit forecast by 8% (see Figure 1-5 for details).