Carabao Group PCL (CBG), Thailand’s second-largest energy drink company, shares rose sharply at the opening on Monday by as much as 7 per cent after the company reported results that exceeded market expectations.
Despite the contraction caused by COVID-19, CBG is one of the better-performing companies during the economic recession with great product sales and a growing export market.
Pongsarn Klongwathanakit, the CBG chief financial officer, reported that the company’s net profit attributed to its shareholders was at 881 million baht, increasing by 329 million baht or 59.6 per cent compared to the same period in 2019.
The sales proportion to net profit surged from 14.7 per cent to 19.6 per cent, which was driven by improving sales, overall gross profit margin and efficient expenses control.
In the first half of 2020, the company’s net profit attributed to its shareholders was 1,682 million baht, an increase of 711 million baht or 73.1 per cent, representing a ratio to sales of 19.6 per cent, up from 13.7 per cent year-on-year.
The total revenue in the second quarter in 2020 from sales was 4,508 million baht, a 20 per cent increase of 754 million baht (82 per cent own-brand sales, 2 per cent branded OEM and 13 per cent third-party sales distribution).
Sales of branded products by its own manufacturer were 3,713 million baht, up by 13.6 per cent or 446 million baht with the domestic and overseas proportion at 40:60.
Woody C+ Lock
CBG saw a small drop in its overseas and domestic sales of the branded product by 1.7 per cent due to interrupted business activities from lockdown measures over the past few months.
However, most of the drop was compensated by sales of the new product Woody C+ Lock Lemon Flavoured launched in March 2020 under the company’s production and joint venture with A Woody Drink company limited (AWD)’s management.
The company released Woody C+ Lock Orange Flavoured in June 2020 while it began exporting to neighboring countries in CLMV.
With the contraction of the energy drink market in the second quarter of 2020, Woody C+ Lock held a 6.4 per cent volume share in the market which ranked fourth over.
Carabao Dang energy drink remains the second-largest brand, commanding a 21.4 per cent volume share.
Better-than-expected result
According to Bualuang Securities report, CBG has exceeded their forecast by 12 per cent due to the positive surprise in sales.
Bualuang predicted the CBG core profit for the third quarter of 2020 to go up by approximately 20-25 per cent year-on-year and at single-digit growth quarter-on-quarter. Sales would hit an all-time high in the third quarter with double growth year-in-year.
The CBG core profit forecasts were revised by 3 per cent in 2020 and 9 per cent in 2021 with possible sales growth rising by 3 per cent in 2020 and 5 per cent in 2021 while SG&A expenses remain under control.
Bualuang recommends ‘waiting for a good entry price’ (120 baht and below) for investors who lack exposure to CBG. The current ‘buy’ rating stands at a target price of 135 baht, moving up to reflect the new model.
Meanwhile, KTB Securities recommends ‘buying’ with the revised target price at 170 baht (earlier 132 baht) based on 2021 PER at 38.0x, equal to the five-year average PER with a surprisingly good outlook result for CBG.
As Monday morning’s session ended (12:30 p.m.), CBG shares stood at 132.00 baht per share, surging 6.00 per cent or +4.76 baht. However, at last Friday’s closing, CBG saw a 0.8 per cent increase with a transaction value at 448.8 million baht.
