Equity Analysis /

Thailand: Thai Grocery Retailers - Dominant players will lead recovery

  • Convenience & smart merchandizing lock in consumers

  • Online supermarket will be next growth driver for sector

  • Retailers can pass through higher prices

Bualuang Securities
17 March 2022

We have re-initiated coverage on CPALL and MAKRO with BUY calls and target prices of Bt79 and Bt48, respectively. Apart from benefiting from the macro-economic recovery, we expect the two firms to build market share during the next two years. Although cost-push inflation may be an issue in 2022, CPALL and MAKRO can generally pass through higher prices. Their respective profit and stock price growth outlooks for 2H22 onward are exciting.

Convenience & smart merchandizing lock in consumers

Convenience and the right product range are key to building and maintaining consumer loyalty. Consumer preferences have migrated from traditional- to modern-trade (and now to e-tail). Product preferences are also shifting—from simple raw materials for cooking to ready-to-eat and ready-to-cook items. CPALL and MAKRO cater to different customer groups. CPALL is Thailand’s top convenience (CVS) store player by a huge margin (and biggest retailer). MAKRO is a cash&carry business focused on HoReCa customers (and in Oct 2021 CPG transferred the Lotus’s Thai and Malaysia operations to its balance sheet). But they both dynamically manage merchandise, have different formats for different locations, and have developed superior logistics.