AH – 2Q26 beat, but 2H26 outlook turns softer

AH reported a 2Q26 net profit of Bt195mn, up 81% YoY but down 38% QoQ, beating market expectations by 33%. Excluding FX losses, core profit came in at Bt202mn, up 78% YoY but down 35% QoQ. The strong YoY earnings growth was driven by higher gross margins and stronger equity income. While we raise our earnings forecasts following the stronger-than-expected 2Q26 results, we expect 2H26 earnings to soften due to weaker OEM demand and lower equity income. Nevertheless, an attractive dividend yield of around 6% should provide valuation support. We maintain NEUTRAL with a new mid-2027 TP of Bt16.8.

2Q26: Beat estimates. AH reported a 2Q26 net profit of Bt195mn, up 81% YoY but down 38% QoQ, beating market expectations by 33%. Excluding FX losses, core profit was Bt202mn, up 78% YoY but down 35% QoQ. The strong YoY earnings growth was driven by higher gross margins and stronger equity income.

Highlights:

OEM parts sales (66% of revenue) declined 5% YoY and 2% QoQ to Bt4.4bn. Operations in Thailand (36% of revenue) and China (5%) remained weak due to sluggish Thai vehicle production, the end of VinFast orders, and intense competition in China. In contrast, Portugal (21%) and Malaysia (4%) delivered solid growth, supported by new project launches, a low base from Portugal's power outage disruption in 2Q25, and higher order volumes from Proton in Malaysia.
Car dealership sales (34% of revenue) rose 17% YoY and 26% QoQ to Bt2.2bn. Malaysia (20% of revenue) remained the key growth driver, supported by strong Proton sales and momentum from new EV models. Thailand (14%) posted modest growth despite tight auto loan approvals. However, earnings contribution from this segment remained limited due to its low profitability, with an EBIT margin of only around 1%.
Gross margin improved to 8.5% in 2Q26 from 7.4% in 2Q25, mainly driven by the recovery of Portugal operations following the absence of the power blackout disruptions seen last year, together with improved cost control.
Equity income increased to Bt102mn, up 58% YoY and 27% QoQ. We believe the stronger contribution was supported by Purem Aapico.

Earnings upgrade, but 2H26 likely softer. We raise our 2026-27 core earnings forecasts by 5% following the stronger-than-expected 2Q26 results. However, we expect earnings momentum to soften in 2H26. The main headwind remains the OEM business in Thailand. The recovery in Thailand's auto production remains uncertain, while a key OEM customer will suspend production for 2-3 weeks in 3Q26 for a factory re-layout, temporarily reducing component orders and shipments. Meanwhile, equity income should normalize from the elevated 2Q26 level as the US JV moves into its construction and pre-operating phase, with share losses likely in 2027-28 before commercial production begins in 2029. Despite the softer outlook, we see AH's attractive dividend yield of around 6% should provide downside support. We maintain NEUTRAL with a new mid-2027 TP of Bt16.8 (from end-2026 TP of Bt16), based on 6.9x PE, or -0.5SD below its historical average.

Risks. 1) Economic uncertainty derailing auto demand, 2) semiconductor shortages that disrupt auto supply chains, 3) litigation cases. We see the key ESG risk as environmental issues (E), but AH is clearly moving on its sustainability development with committed targets.