Beverage space now trades at inexpensive PERs of 34x for 2022 and 29x for 2023 (versus 35-49x in 2017-21) against a YoY profit growth profile of 27% for 2H22 and 19% for 2023. We prefer CBG over OSP for its more expansive earnings outlook, rising Thailand energy drinks market share (our analysis suggest that for every 1% it adds to market share, the upside to its profit profile would be 9%), and fast-growing new distribution business.
Why take positions in Beverage space?
We believe the Beverage sector will benefit from post-COVID recoveries in Thailand and other markets, so have re-initiated coverage on CBG and OSP with BUY ratings. The stock prices of both companies are currently below their respective historical averages. CBG is our top pick for its stronger earnings growth drivers. Thanks to lower raw material costs (chiefly aluminum), CBG can maintain sales prices low in order to retain brand loyalty; it built market share during 2Q22. On the earnings front, we expect CBG’s ROE to rise to 30.7% in 2023 (28.6% in 2021), far above OSP’s projected 2023 ROE of 17.3% (16.6% in 2021).