Thai Beverage downgraded by RHB despite fiscal 3Q results beating forecasts

Chang Beer, made by Thai BeverageChang Beer, made by Thai Beverage

RHB downgraded Thai Beverage to Take Profit from Buy, saying share price has “performed well” so far this year and is now fairly priced.

“We deem it difficult to continue rallying next year, given some headwinds in its biggest segment, spirits. Investors can look to accumulate at below S$0.83,” the brokerage said in a note Friday, adding investors can “drink again when it’s cheaper.”

RHB said the beverage maker’s earnings results came in ahead of its forecasts on strong contributions from its associates, as well as on higher sales volumes and better margins across all segments.

Thai Beverage reported Wednesday its fiscal third quarter net profit climbed 26 percent on-year to 7.66 billion baht (S$344.90 million or US$248.38 million) amid higher contributions from the food, beer and spirits segments.

The spirits business posted third quarter sales revenue of 26.27 billion baht, up 6.9 percent on-year, while net profit for the segment increased 11 percent on-year to 4.46 billion baht.

RHB said the spirits segment’s performance was “awesome,” growth was likely to temper as the improved sales and margins were attributed to double-digit sales of brown spirits to trade agents.

“Underlying consumer demand for such spirits only grew at 3 percent. Consequently, we expect volumes and margins to normalise next quarter,” the note said. “In addition, we expect gross margins to contract next year, as Thaibev will be changing bottles for its white spirits starting September. Management also expects higher raw material costs, particularly molasses, next year.”

RHB kept its target price at S$0.92.

The stock ended Friday down 2.21 percent at S$0.89; the shares are up 45.9 percent year-to-date.

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