Introduction

Thai Beverage Public Company Limited (THBEV), Thailand’s largest beverage producer, has released its Q1 FY25 business update. The report provides key insights into the company’s performance across its segments, including spirits, beer, non-alcoholic beverages (NAB), and food. Here is a comprehensive breakdown of the company’s financial performance, segment analysis, and future outlook as per UOB Kay Hian’s recommendations.

Company Overview

Thai Beverage Public Company Limited (THBEV) holds the largest market share in spirits within Thailand, offering a diverse range of products that include spirits, beer, non-alcoholic beverages, and food. The company is listed in the Consumer Staples sector under the Bloomberg ticker THBEV SP. With a market capitalization of S\$12.57 billion (US\$9.37 billion) and a share price of S\$0.50 as of the report date, THBEV remains a key player in the regional beverage market.

Stock Recommendation and Target Price

UOB Kay Hian has maintained its “BUY” recommendation for THBEV, with a target price of S\$0.56, offering a potential upside of 12%. The stock is seen as attractively priced at -1.5 standard deviations (SD) to its mean price-to-earnings (PE) ratio, supported by a robust dividend yield of 5.4% for FY25.

Key Financial Highlights

• Revenue Growth: Q1 FY25 revenue grew by 2.4% year-on-year (yoy) to 92,265 million baht, driven primarily by the beer and NAB segments.
• EBITDA Decline: EBITDA for the quarter decreased slightly by 0.8% yoy to 16,443 million baht, largely due to underperformance in the spirits segment.
• EBITDA Margin: The overall EBITDA margin declined by 0.6 percentage points to 17.8%.
• Deleveraging Efforts: THBEV’s gearing ratio improved from 0.79x in Q4 FY24 to 0.73x in Q1 FY25, reflecting ongoing deleveraging.

Segmental Performance

1. Spirits Segment: Underperformance

The spirits segment experienced a revenue decline of 4.8% yoy to 32,238 million baht, with EBITDA falling 12% yoy to 7,949 million baht. Notably, the segment’s EBITDA margin dropped by 2 percentage points to 24.7%, impacted by higher operating costs and advertising and promotional (A&P) spending. The underperformance was attributed to weaker-than-expected sales of white spirits, despite a slight improvement in brown spirits during the quarter.

Outlook: A recovery is expected in Q2 FY25, driven by an improving domestic economic outlook, festive season demand, and increased tourist arrivals. Additionally, management highlighted that raw material costs for molasses are expected to be 10-20% lower, which should improve margins in subsequent quarters.

2. Beer Segment: Outperformance

The beer segment delivered strong results, with revenue rising 8% yoy to 36,107 million baht and EBITDA surging 16.6% yoy to 4,433 million baht. The segment’s EBITDA margin improved by 0.9 percentage points, supported by efficient A&P spending and lower raw material costs.

Outlook: Continued growth is anticipated in Q2 FY25, fueled by improving market conditions, cost efficiencies, and increased market share in Thailand and Vietnam. Management also expects raw material costs to decline in the first half of FY25, further supporting profitability.

3. Non-Alcoholic Beverages (NAB): Robust Performance

The NAB segment recorded a revenue increase of 7.2% yoy to 16,955 million baht, with EBITDA climbing 15.6% yoy to 3,333 million baht. Higher sales volumes (+7.5% yoy), cost efficiencies, and lower raw material prices contributed to a 1.4 percentage point improvement in EBITDA margin.

Outlook: The segment is expected to maintain its growth trajectory, supported by strong demand and operational efficiencies.

4. Food and Others: Lower Profitability

Food segment revenue grew by 2.2% yoy to 5,689 million baht, but EBITDA fell by 6.6% yoy to 662 million baht due to higher operating costs. The “Others” segment saw revenue decline by 6.6% yoy to 1,343 million baht, with EBITDA plummeting 55.1% yoy to 66 million baht, primarily due to lower licensing income and title rights.

Key Financial Metrics and Projections

• FY25 EBITDA: Projected to grow by 7.8% yoy to 56,864 million baht.
• Net Profit: Expected to reach 29,252 million baht, representing a 7.5% yoy increase.
• Dividend Yield: Estimated at 5.4% for FY25, increasing to 5.8% by FY27.
• PE Ratio: Projected at 10.8x for FY25, improving to 9.4x by FY27.
• Debt Metrics: Net debt-to-equity ratio is expected to decline from 125.5% in FY24 to 90.8% in FY27.

Valuation and Recommendation

UOB Kay Hian maintains its “BUY” recommendation for THBEV with a target price of S\$0.56, implying a 12x FY25F PE multiple, which is -1.5SD below the long-term average. The stock’s valuation is supported by its attractive dividend yield and potential catalysts, such as the anticipated BeerCo IPO.

Potential Catalysts

• Gaining market share in the beer segment.
• Potential merger and acquisition activities or spin-off listings, including the BeerCo IPO.