Equity Analysis /
Thailand

Carabao Group PCL: Strong vibes for good entry

  • Awakened China

  • GM at a nadir

  • High hopes for strong growth for 2022

Bualuang Securities
30 August 2021

We prefer CBG for medium to long-term investment given good entry valuations at a 2022 PER of 28.8x, a 20% discount to its long-term mean of 35.6x. A bearish PER has mostly priced in short-term earnings caution by the street. BUY rating stands at a YE22 DCF-derived target price of Bt160 (6.5% WACC, 2% terminal growth).  

Awakened China

CBG’s business in China has revived since 1Q21 after struggling for three years in 2018-2020 (China sales fell by 42% in 2018, 17% in 2019 and 22% in 2020: bottoming out at Bt385m in 2020). In 1H21, exports to China resumed with a jump of 213% YoY to Bt698m (hitting record high at Bt488m in 2Q21) thanks to a good collaboration with local dealers (strong footprint in Yunnan, Guangdong, Sichuan, Jiangsu and Gansu). In 2H21, we expect China sales to double YoY (QoQ decline in 3Q21 and 4Q21 by seasonality). China exposure is growing from 5% of CBG’s exports in 2020 to 14% in 2021 (Bt1.1bn sales in our model): from 2% of total revenue in 2020 to 6% in 2021. China growth is promising, 40% growth forecast in 2022: 8% of total sales contribution.