Thai Beverage: Short term macroeconomic headwinds
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- Thailand Beer positive momentum ongoing with management indicating gains in market share and high brand equity awareness for Chang Beer
- Spirits and Beer could see better gross margins in 2H25 on more conducive raw material price (molasses, malt, glass, etc)
- While catalyst from BeerCo IPO not imminent, recent share price weakness have factored in outlook and political uncertainty. Maintain BUY, TP SGD0.63 as valuation at ~11x FY25F PE attractive (near -2SD historical average) with ~5% yield support
What’s new
We attended ThaiBev Annual Information Meeting for shareholders and analysts’ on 20 June. Interest and questions to ThaiBev management focused on both near-term and longer-term consumption trends for spirits and beer in Thailand and Vietnam, amid prevailing macroeconomic softness and geopolitical uncertainties. The margins backdrop and outlook arising from raw materials movement for its Spirits and Beer segments were also raised. In addition, focus was also BeerCo IPO updates and timeline. Other areas of discussions centered around management strategy and actions in relation to regulatory changes such as the Alcohol Control Act in Thailand and special sales tax (SST) in Vietnam, and the group’s capital structure. We summarise the key topics and points below.
Our views
Share price near -2SD of 10-year historical average, already priced in weak outlook. Management tone and message seems to point to a margin improvement in the second half of the year, underpinned by easing raw material costs—including molasses for spirits, and malt, glass, and aluminium for beer. While the share price has declined by approximately 14% since the 1H25 results announcement and is down about 5% in the past week—likely due to renewed concerns over Thailand’s political climate—historical patterns suggest that such political noise has had limited correlation with the stock’s performance. Instead, margins and consumer demand tend to be the key price drivers. At c.11x FY25F PE, the stock now trades close to -2 standard deviations below its 10-year average, reflecting weak sentiment that may already be priced in. Based on our view, investors are awaiting potential re-rating catalysts, particularly clarity on the timing of the BeerCo IPO, value-unlocking moves, or the entry of a strategic investor—elements which remain uncertain at this juncture given the current macro and geopolitical environment. Nonetheless, valuation for the counter appears undemanding, with downside risk likely cushioned by an estimated ~5% dividend yield. We maintain our BUY with TP at SGD0.63, based on 16x.
Grouped summary of topics raised and discussed
Spirits – Thailand
White‑spirit volumes remain under pressure as rural incomes lag, but brown spirits continue to anchor profitability thanks to stronger brand loyalty and pricing power. Management indicated that a 10‑15 % decline in molasses costs should begin to lift margins by 4Q25, although management flagged a lag from weighted‑average costing. Premium extensions for Thailand first premium single malt whisky and new RTDs (Zato) are being rolled out to widen the profit pool and capture younger consumers.
Beer – Thailand
Beer was the stand‑out performer. Chang Classic has consolidated leadership in the mainstream segment, while Chang Cold Brew builds lifestyle equity in 30 key provinces which contributes 80% of the market. Management highlighted a drop in malt, glass and energy costs, translating to margin expansion. The near‑term goal is to cross the symbolic 45% market‑share threshold, ultimately aiming for a majority share. Management indicated that Chang brand had achieved 50% brand equity index.
Beer – Vietnam (Sabeco)
Despite tighter drink‑driving enforcement, future excise hikes and weak macro environment, management remains bullish on Vietnam’s mid to long term beer trajectory given favourable demographics and a 95 % beer share of total alcohol consumption. Crucially, the 2027 special‑sales‑tax (SST) shift will retain a value‑based formula, vis-à-vis volume-based which was said to be favoured by other competitor. While the SST rate will increase from 65% to 70%, the net implied increase on selling prices is estimated to be about 2%. Price increase from SST will be fully passed on. On the back of expected price increase from SST and weaker consumer purchasing power arising from macro economic uncertainties, the value segment is expected to benefit due to downtrading. Sabeco will reinforce its lower‑price portfolio and deepen rural distribution to defend its number‑one position.
Regulatory Backdrop
In Thailand, a revised Excise Act (passed) and an amended Alcohol Beverage Control Act (in Senate review) will relax entry barriers and some sales restrictions, potentially intensifying competition. Management argues ThaiBev’s scale, route‑to‑market infrastructure and digital reach will remain decisive moats. In Vietnam, industry coordination should ensure tax increases are fully passed through with limited elasticity impact.
Capital Allocation & Financials
ThaiBev reiterated its Ba3 (stable) credit rating and manageable leverage. No large M&A is contemplated. The ~20% Vinamilk stake is viewed as a strategic, yield‑accretive asset; the F&N Singapore listing is retained for future restructuring flexibility. The BeerCo IPO remains on the card but timing is uncertain given current market conditions, reflecting a stance of “strategic patience.”
Outlook
Management tone suggest for a margin uplift in spirits from 4Q25 and sustained profit growth in beer through cost tailwinds and market‑share gains. Regulatory changes remain the key watch‑point, but management believes proactive engagement and brand strength provide sufficient defences. ASEAN’s beer landscape, centred on Vietnam and Thailand, remains ThaiBev’s primary growth engine.
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