CP ALL: 2Q25F showed decent growth despite adverse economic situation
- 2Q25F performance showed decent growth of 10% y/y despite economic challenges
- Store expansion a revenue driver this quarter, with prolonged gross margin improvement and well-controlled expenses
- 3Q25F growth may remain unexciting; 4Q25F shows a more upbeat tone
- Maintain BUY with an unchanged DCF-based TP of THB69.0
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2Q25F earnings growth to show resilience. We forecast CPALL will deliver a core profit of THB6.8bn (+10.0% y/y, -10.5% q/q). The softer q/q was due to softer seasonality and worsening economic situation. Meanwhile, y/y growth was mostly driven by store expansion and gross margin improvement for both CVS (7-Eleven) and CPAXT. We expect no material extra items in 4Q24F, resulting in 2Q25F net profit of THB6.8bn (+8.8% y/y, -10.5% q/q).
We anticipate overall net margin of 2.7% in 2Q25F (+20bps y/y) following consolidated gross margin expansion from improving gross margin in 7-Eleven and CPAXT’s wholesale business, as well as a higher contribution of the CVS business given faster topline growth (which typically yields a higher gross margin).
In 2Q25, we also expect a small decline in CPALL’s y/y interest expenses – mainly from CVS’s more favourable recent refinancing costs in 2024.
Excluding profit contribution from CPAXT, we forecast CVS’s standalone net profit to come in at THB5.4bn (+9.0% y/y, -10.3% q/q) in 2Q25F. We note that the softer q/q earnings were impacted from seasonality and a slowdown in consumption. On a y/y basis, performance was still supported by store expansion and gross margin improvement during the period.
CVS: 2Q25F highlights
SSSG slightly contracted in 2Q25F. CVS’s revenue growth is expected to register at THB117.4bn (+4.8% y/y, +3.0% q/q). Revenue growth was supported by store expansion (+5.1% y/y). The company would likely post negative CVS SSSG of -0.3%. Negative SSSG was weighed down by lower domestic mobility, especially in June, along with lower tourist numbers and worsening weather conditions, resulting in store traffic of 999/store/day (-0.8% y/y, c.82% of pre-pandemic level).
Nonetheless, ticket size is expected to remain healthy at THB87 (+0.5% y/y, c.125% of pre-pandemic level). In 2Q25F, we estimate CPALL would have opened 180 7-Eleven stores, operating 15,610 stores as of end-2Q25 and on track with its full-year forecast of opening 700 stores in 2025.
Healthy gross margin maintained. CVS’s gross margin should stay high at 29.2%, slightly lower from 29.4% in 1Q25, but continue to expand 20bps y/y. The wider y/y margin was supported by a better product mix after strong demand of ready-to-eat products with low-margin product base – like cigarettes – normalising. We also expect some benefits from better cost leverage and utility costs reflecting lower SG&A-expenses-to-sales from 28.9% in 2Q24 to 28.8% in 2Q25F.
CPAXT: 2Q25F highlights
2Q25F growth mostly driven by wholesale business. We anticipate 1Q25F core profit at THB2.4bn (+8.0% y/y, -11.1% q/q). Y/y, earnings growth is expected to be supported by sales growth and wider gross margin and well-controlled SG&A expenses.
We estimate Makro (wholesale business) and Lotus’s (retail business) to deliver SSSGs of 0.0% and -0.1%, respectively. CPAXT’s sales growth is expected to be 2.0% in 2Q25F on the back of Makro and Lotus’s store expansion. We note that the flattish of SSSG was weighed down by lower demand of cooling items and beverages during the quarter from Thailand’s different weather conditions in 2Q25 vs. 2Q24 as well as lower bulk sales for Makro. Nonetheless, on retail business, Malaysia has shown strong sales performance after the company took efforts to re-strategize its product portfolios in Malaysia.
CPAXT’s consolidated GPM is expected to further improve y/y due to a greater focus on fresh food, benefits from joint sourcing, and an increase in private label mix. Nevertheless, individually, only Makro’s gross margin could improve y/y while Lotus’s gross margin was still under pressure from price competition. In 2Q25, we expect SG&A expenses to be well controlled and show improvement y/y.
Outlook
Growth might remain unexciting in 3Q25 before accelerating in 4Q25. MTD, 7-Eleven’s SSSG would likely remain at the same level as 2Q25 following rising uncertainties which slowdown local consumption and weak inbound tourism. Nonetheless, we believe the recent stimulus scheme aiming to boost local tourism should benefit the 7-Eleven with more domestic mobility.
In 4Q25, we expect inbound tourism to recover with an easing uncertainty situation i.e. domestic politic stability and US reciprocal tariff which would bring back consumer confidence during the high season. Meanwhile, we estimate more material synergy benefits at the CPAXT level in 4Q25, which should further support margin expansion.
We note that the raise of minimum wages to THB400 in Bangkok from 1 July 2025 would have very limited impact from both CPALL and CPAXT as the company has gradually increase the wages for their staff and mostly pay the staff more than the new minimum wages at THB400 per day.
Recommendation
Reiterate BUY with an unchanged DCF-based TP of THB69.00. We maintained our earnings forecast for FY25F as 1Q25 results accounted for 26% of our full-year estimate. In 2025, we estimate CVS SSSG to be 3% and Makro and Lotus’s to be 2%. Gross margin is expected to further improve by 20-25bps across all business units. Net-net, we expect core profit growth of 14% in FY25F.
The stock is trading at an attractive valuation at -1.5SD of its five-year historical average. We maintain BUY on CPALL for its continued strong earnings momentum and defensive appeal. We believe CPALL stands as a prime beneficiary of the return of foreign fund flow as the current foreign holding current dropped to 24-25% in 2025 vs. 34% on average during 2005-2025.
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