We have initiated coverage on DOHOME with a BUY call (a target price of Bt20.5) and transferred our GLOBAL coverage (HOLD, Bt20). In the short-term, both firms will mark soft earnings—sharply higher steel prices boosted 2021 profits and this year inflation may squeeze the purchasing power of mid- to low-income demographics. But over the long haul, both firms will benefit from rising provincial urbanization. DOHOME is our top pick.
DOHOME and GLOBAL are both building market share and profits
DOHOME and GLOBAL are both building market share at the expense of traditional trade. Thailand’s home construction market was worth about Bt470bn in 2020, we estimate (from Commerce Ministry statistics and data from firms). Traditional trade’s market share (although in decline) still exceeded 50% in 2020. Both DOHOME and GLOBAL are expanding their branch networks and have extensive supply chains. Although we assume a 2022-24 industry revenue CAGR of just 3%, our sales CAGR assumptions are 20% for DOHOME and 9% for GLOBAL. Also, rising private-label sales will fatten margins, so we forecast 2022-24 core earnings CAGRs of 17% for DOHOME and 12% for GLOBAL.