Equity Analysis /
Thailand

Carabao Group PCL: The worst has passed; tomorrow’s a new day

  • Trading at a discount, despite fast profit growth

  • Domestic and overseas markets ramping up well

  • Good 2Q22 earnings expected

Bualuang Securities
20 July 2022

CBG is best play for both the short run and the long haul. 2H22 profit will be supported by Thailand’s reopening and easing cost pressures. And there’s scope for upside to our model from a rising market share. Our sensitivity analysis suggests that for every 1% of market share gained, CBG’s profit rises by 9%. Its PER is currently discounted 20% from its eight-year mean against strong fundamentals, ex-Thailand sales expansion, and a rising ROE.

Trading at a discount, despite fast profit growth

The stock trades at a 2023 PER of 30x, a 20% discount to its eight-year historical mean (since its IPO in 2014) of 36x, despite major positive factors. Firstly, CBG’s has built market share in Thai energy drinks space—from 20.7% in 2021 to 21.7% in 2Q22—and we expect more in 2H22. Secondly, it has expanded ex-Thailand sales (the firm is now the biggest player in Cambodia). Our model points to overseas sales rising from Bt2.0bn in 2014 to Bt8.2bn in 2022 and Bt9.6bn in 2023. Lastly, CBG’s net profit has expanded fast from Bt913m in 2014; we forecast Bt3.1bn for 2022 and Bt3.7bn for 2023. And our model points to ROE rising from 15% in 2014 to 29% in 2022 and 31% in 2023. The numbers indicate strong fundamentals in the face of a discounted valuation.