Equity Analysis /
Thailand

Thailand: Beverage - No earnings drivers in sight

  • Street profit forecast-cutting threatens further stock price downside

  • Heightened competition continues to squeeze profitability

  • CBG—weak 3Q22; better numbers for 4Q22

Bualuang Securities
3 October 2022

Our Beverage sector call shifts down to NEUTRAL, due to a paucity of 2H22 earnings drivers. We expect a 13% coverage profit slide for 2022, due to slimmer margins and weak exports. CBG remains a BUY rating. We have downgraded OSP to HOLD.

Street profit forecast-cutting threatens further stock price downside

The sector’s fragile outlook prompted us to cut our coverage profit fore-casts by 9% for 2022 and 14% in 2023. Heightened competition in the domestic energy drinks market has triggered price promotions, squeezing margins, and export sales are weak (exacerbated by a slump in the Myanmar kyat), so the prospects for 3Q22 earnings are poor. We believe those market concerns have caused the stock prices of CBG and OSP to plunge to their lowest levels this year. But our Beverage coverage’s mean 2023 PER is 28x, below its 2018-21 mean of 31x, so the risk of further stock price downside appears limited. We expect CBG’s 4Q22 earnings to recover after a 3Q22 hiccup, but OSP’s recovery path is unclear.