Carabao Group PCL

Earning beat for 3Q23. Management is confident over new venture’s margins. Expect YoY and QoQ earnings growth for 4Q23.

Valuation metrics are undemanding. CBG—3Q23 earnings should rise marginally YoY and QoQ. OSP—3Q23 earnings look set to rise YoY but decline QoQ.

What could the impact be on beverage operators? CBG—we still expect 4Q23 earnings to rise YoY and QoQ. OSP—only minimally affected by a global sugar price increase.

Coverage 2023 earnings should rise YoY. CBG—upbeat outlook. OSP—upgrade from HOLD to BUY.

New information boosts our profit forecasts and target price. Potential target price could ramp up to Bt121. Expect YoY and QoQ earnings growth for 3Q23 and 4Q23.

2Q23 profit expansion expected—higher sales and lower costs. CBG—domestic market share expansion. OSP—QoQ earnings rise expected.

Bottomed out in 1Q23. Domestic market share on the rise. Earnings catalysts building up through 4Q23.

Profit was below our estimate and that of the consensus. CBG reported earnings of Bt264m for 1Q23. The 1Q23 top-line declined 14% YoY.

Insipid outlook undermines Thailand’s energy drink sector. CBG: Downgrade earnings and recommendation. OSP: Earnings improvement QoQ.

Sector’s market share shift should be apparent in mid-2023. CBG: stronger catalysts should kick in by 2H23. OSP: gradual QoQ earnings turnaround momentum.

Profit was below our estimate and that of the consensus. CBG reported earnings of Bt409m for 4Q22. The 4Q22 top-line rose 6% YoY.

Keep eyes peeled on the upcoming dynamic move! Our scenario for CBG: potentially adding Bt5-10/share. Our scenario for OSP: potentially adding Bt4/share.

Better outlook, but not the best. A stable market share for CBG; OSP to struggle to rebuild share. We prefer CBG over OSP.

Profit was below our estimate and the consensus. CBG reported earnings of Bt475m for 3Q22. The 3Q22 top-line rose 19% YoY.

Street profit forecast-cutting threatens further stock price downside. Heightened competition continues to squeeze profitability. CBG—weak 3Q22; better numbers for 4Q22.

Expect QoQ profit slippage for 3Q22. Slim margins will persist into 3Q22 …. …to be followed by the best quarter of the year.

2Q22 profit was in line with our estimate and the consensus. CBG reported core earnings of Bt742m for 2Q22. Revenue totaled Bt5.25bn in 2Q22.

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. 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.

We prefer CBG for medium to long-term investment given good entry valuations at a 2022 PER of 28.8x, a 20% discount to its long-term mean of 35.6x. A bearish PER has mostly priced in short-term earnings caution by the street. BUY rating stands at a YE22 DCF-derived target price of Bt160 (6.5% WACC, 2% terminal growth). CBG’s business in China has revived since 1Q21 after struggling for three years in 2018-2020 (China sales fell by 42% in 2018, 17% in 2019 and 22% in 2020: bottoming out at Bt385m in 2020). In 2H21, we expect China sales to double YoY (QoQ decline in 3Q21 and 4Q21 by seasonality).

In line. CBG reported an all-time high quarterly core profit of Bt967m for 2Q21. CBG has high potential to repeat its record core earnings in 3Q21.

Improving lead indicators. Broad recovery in 2Q21 sector results outlook. Top-five winners are BCH, CHG, CBG, DOHOME and GLOBAL.

Earnings accretion in 2022. Welcome back exports. Exciting earnings are beckoning.

Below all estimates. CBG reported core profit of Bt700m for 1Q21. The weak result in 1Q21 was the result of sales slippages and margins squeeze.