TACC expects revenue in 2023 to grow 10%, but profit flat under pressure from weak margins

along with the virtue of opening the city This was also driven by 7-Eleven branch expansion (+704 branches YoY, +178 branches QoQ) and marketing activities at the end of the year, but % GPM fell to 30.80% (4Q21 = 38.98%, 3Q22 = 35.14 ). %) mainly from higher raw material costs. In addition, the share of income in the low margin group has increased, such as the group of cold pressed drinks, while the SG&A/Sales % has risen to 17.60% (4Q21 = 18.56%, 3Q22 = 16%) of expenses in Cylymodd market activities at year-end seasonally, resulting in 4Q22 profit of 44 million baht -23% YoY -29% QoQ, with full year 2022 revenue and net profit of 1,523 million baht +11% YoY and 235 million baht (close to expectations) +10%YoY respectively

• 1Q23 earnings forecast to soften YoY but improve QoQ: We expect 1Q23 earnings to grow YoY and QoQ following the expansion of 150-200 new 7-Eleven stores from the previous quarter. (More than 90% of the main income depends on 7-Eleven) along with the improving economy. and opening the country to foreign tourists helped boost overall purchasing power. It is a positive result for both 7-Eleven and Non 7-Eleven stores, however, %GPM in 1Q23 is expected to remain low, similar to 4Q22, at around 30.8% compared to 39% in 1Q22 due to costs still high raw material. after being pre-ordered since the end of last year As a result, we expect earnings in 1Q23 to shrink YoY but improve QoQ.

• 2023 revenue projection is expected to grow 10% YoY, but profit is expected to be flat from last year. Under pressure from weak margins: We maintain our revenue forecast for 2023 of Bt1,683mn +10%YoY, driven by growth in 7-Eleven and Non-7-Eleven stores.

7-Eleven Store Group: 7-Eleven stores recover from the unwinding COVID-19 situation And benefit from the plan to expand 7-Eleven branches in the country about 700 locations and 7-Eleven in Cambodia expects to expand 10 location, while 7-Eleven in Malaysia currently has a total of 2,400 locations. Last year, the company tried to sell products in 50 locations. It is expected to expand to sell more than 200 locations.

Not 7-11: 1) Beverage business The company intends to continuously expand its product sales to partner cafes such as Jungle Café, Black Canyon, ARABITIA, Lotus’s Hypermarket, Bon Café and Punthai Coffee, etc. CLMV Singapore and Malaysia and also copyrighted new cartoon characters. in additional sales such as Warbie Yama and the Line Creators group, etc. 3) New product “TRIVA” concentrated natural fruit syrup. There are more distribution plans for Cafes domestically and internationally, and 4) M&A Plans to penetrate the Health and Wellness business On April 11, the company revealed that it has invested in Health In Spide Planet Co., Ltd (HIP) . , a distributor of dietary supplements. skin care products Beauty and health products under the Bloss Natura brand with an investment value of over 40 million baht (holding 89%), which will start to recognize revenue from 2Q23 onwards. However, we have not included in the 2023 forecast.

% GPM is expected to decrease to the level 33% from the previous year at 35% and down from the previous forecast at 38% due to the high cost of raw materials in 1H23 after pre-ordering since the end of last year. But it is expected to improve during 2H23 onwards. At the moment, the company is in the process of negotiating a price increase with trading partners. If successful, it will be a plus to our forecast for 2023. We expect earnings in 2023 to be around Bt231mn -2%YoY, down 17% from the previous estimate, mainly from the weaker % GPM than the previous estimate.

• Maintain ‘BUY’ recommendation, but revised target price down to Bt7.60 We have a NEUTRAL view on 2023 performance, expecting fixed production costs to weigh on 1H23. But it is expected to gradually improve from 2H23 onwards. We estimate TACC’s fair value at 7.60 baht, down from the previous target price of 8.20 due to 2023 earnings per share forecasts down to 0.38 baht from the original 0.46 baht, in based on the prospective PER of 20x based on a 3-year average, which is still lower than the PE drink industry of 25x Current share price is still around 26% upside, and has the company any interest bearing debt. and paying dividends at a rate of over 5% per annum We therefore maintain our BUY recommendation.

risk

1) Intense competition in the drinks industry
2) More than 90% of the income depends on 7-Eleven stores.
3) Volatility of raw material costs