ADVANC-Preview 1Q24F: Expect slow earnings recovery

ADVANC share price has fallen 6.9% YTD, underperforming the SET by 5.6%. That
being said, we do not believe now is a good time to reenter the stock, as earnings
growth this year looks unexciting at 3.6% YoY to Bt29.5bn. We estimate 1Q24F
net profit at Bt7bn, relatively flat QoQ, but growing 4.3% YoY. Although core
service revenue should grow strongly at 14.6% YoY, costs related to TTTBB will hit
recovery of the bottom line YoY. We keep our tactical recommendation as
NEUTRAL with a DCF-based TP of Bt246 (6% WACC and 2% LTG). We prefer TRUE
(TP Bt8.5) in the sector from its earnings turnaround story and cheaper valuation
in term of EV/EBITDA.

1Q24F earnings up minimally YoY, flat QoQ. We expect ADVANC to report 1Q24F
net profit of Bt7bn, relatively flat QoQ, but growing 4.3% YoY, with mobile revenue
inching up 1% QoQ and 3.8% YoY to Bt30.4bn. This goes against the usual pattern
of lower mobile revenue in 1Q than in 4Q, but this year strong tourism-related
revenue will drive QoQ up; the YoY growth reflects better pricing. We expect
continued YoY growth in blended mobile ARPU. FBB revenue is estimated at
Bt6.1bn, up 21.2% QoQ and 125.1% YoY, fueled by a by full quarter of contribution
from TTTBB. FBB ARPU should also see YoY improvement as TTTBB subscribers
have a higher ARPU than ADVANC’s. In total, we expect core service revenue at
Bt38.4bn, up 3.7% QoQ and 14.6% YoY, lining up with management guidance of
13-15% growth and our assumption of 14.2%. Meeting our 1Q24F net profit estimate
would be equivalent to 24% of our full-year forecast. ADVANC will release results
on April 30.

TTTBB costs slowing bottom-line growth. Cost of service is expected to grow
3.2% QoQ and 9.1% YoY to Bt10bn, with depreciation rising 5.6% QoQ and 10.3%
YoY to Bt14.1bn. The QoQ and YoY growth for both arises out of a full quarter
contribution from TTTBB. Normally, we see a QoQ drop in SG&A in 1Q, but the
inclusion of TTTBB is expected to push SG&A up 1.5% QoQ and 19.3% YoY to
Bt7.1bn; interest expense is expected to go up 8.6% QoQ and 90.8% YoY to
Bt2.4bn.

Keep our 2024 forecast unchanged. We maintain our 2024F core profit of
Bt29.5bn, up 3.6% YoY. Our assumptions are based on 2% growth in mobile
revenue with 125% growth in FBB revenue, largely contributed by TTTBB. We
expect EBITDA to grow 10.7% YoY. Our key assumptions are in line with
management guidance except for EBITDA, where we are more conservative than
guidance of 14-16% growth.

Risks and concerns. Weak economic recovery would hamper ARPU uplift in the
mobile and FBB businesses. Key ESG risk for the company is in the arena of
cybersecurity and data privacy for subscribers.