Equity Analysis /
Thailand

Siam Makro PCL: Swift HoReCa recovery; strong 2023 profit growth profile

  • Strong makro earnings outweighed by heavy Lotus’s expenses

  • Higher interest rates, a weak baht, further headwinds for 2022

  • More bullish over the 2023-24 earnings outlook

Bualuang Securities
11 July 2022

Although we have cut our MAKRO profit forecasts by 9% for 2022 and 10% for 2023 and trimmed our target price from Bt48 to Bt44, our BUY call stands. The firm’s earnings will trough this year and recover strongly in 2023 onward, as expenses will ease and both the makro and Lotus’s operations will benefit fully from reopening.

Strong makro earnings outweighed by heavy Lotus’s expenses

We expect MAKRO to report a 2Q22 net profit of Bt1,651m (up 28% YoY but down 20% QoQ). The makro cash&carry operation was the YoY earnings growth driver. Seasonality for both makro and Lotus’s are to blame for the modeled QoQ decline. With Thailand’s reopening, we expect makro to mark good SSSG of 6% for the quarter; in contrast we anticipate a Lotus’s SSS decline of 1.2%. While makro’s sales to HoReCa customers ramped up (Figure 2), Lotus’s ticket/customer may have slipped, due to weaker purchasing power among low-income demo-graphics in the face of higher prices. Moreover, heavy spending on IT and rebranding at Lotus’s will have dragged on earnings (Figure 3-5).