Equity Analysis /
Thailand

Thailand: Home Construction Retail - Entering a slow phase

  • Margin squeeze for DOHOME, so 2022-24 forecasts cut

  • GLOBAL’s SSSG would have been much slower in 2Q22

  • Expect earnings to trough in 2H22

Bualuang Securities
21 July 2022

With high SSSG bases from last year, early rains in May, and a steel price peak in April, we expect weak earnings for both DOHOME and GLOBAL, 2Q-4Q22. Steel comprises a bigger prop-ortion of DOHOME’s sales than GLOBAL’s sales, so DOHOME’s 2Q22 margins were probably squeezed harder. But the stock prices of both firms are close to their respective 18-month lows, so we believe the market expects weak earnings.

Margin squeeze for DOHOME, so 2022-24 forecasts cut

Although we assume DOHOME’s 2Q22 SSSG at 12% (and YoY TSSG of 23%), our core profit estimate is just Bt324m, down by 46% YoY and 30% QoQ. We believe that GM was squeezed hard by cost-push inflation (DOHOME tried to ensure price competitiveness) and the normalization of margins for steel products. Our DOHOME 2Q22 GM assumption is 16.5%, down from 22.1% in 2Q21 and 16.9% in 1Q22. Also, the openings of new stores would have pushed up SG&A expenses by about 36% YoY and 5% QoQ (Figure 9).