Can ThaiBev already raise its glass following the revival of Thailand's nightlife?

An analyst said THBEV will likely see a recovery in consumption volumes, but not in its earnings.

Bars and pubs in Thailand are now allowed to serve alcohol up to midnight which bodes well for beverage companies like SGX-listed ThaiBev (THBEV). 

However, UOB Kay Hian said ThaiBev can’t raise its glass yet, as the nightlife’s return will only allow for recovery in consumption volumes of ThaiBev, but not necessarily its earnings.

In a report, the analyst said ThaiBev’s earnings are still being dragged down by rising raw material costs and record inflation.

“Thailand is facing its highest inflation rate in 14 years, driven by soaring energy and food prices. This has trickled down to increasing prices for essential raw materials such as sugarcane, rice and malt,” UOB Kay Hian said.

“As last year’s (Dec 20-Apr 21) molasses crop yield was one of the worst historically, management has also noted that the crop yield this year (Dec 21-Apr 22) has increased ~40% YoY, which has led to lower current molasses costs,” the analyst added.

The higher raw molasses costs will reflect in the 1HFy22 financial results of HTaibe.

UOB Kay Hian also warned that if raw materials remain elevated, even ThaiBenve’s beer segment will face “future margin pressure once its leftover stock depletes.”

Currently, the group has malt stock that will last them for another six to nine months.

Given these factors, UOB Kay Hian lowered its FY22-FY24F profit after taxation and minority interests (PATMI) earnings forecast for ThaiBev by 2% to 4%.