BJC - 3Q24: Core profit in line with estimates

Its 3Q24 core profit was in line at Bt883mn, +22% YoY, with higher sales, wider gross margin and lower SG&A/sales outpacing higher interest and tax expenses, but -27% QoQ. In 4Q24TD, we believe SSS has grown 1-2% YoY (vs +0.02% YoY in 3Q24), with better sales upcountry after the Bt10,000 cash handout to 14.5mn persons in the first week of October. We expect 4Q24F core earnings to be this year’s high, up QoQ from seasonality but down YoY as higher tax rate will be only partially offset by moderate sales growth and better margin. We maintain NEUTRAL with a mid-2025 DCF (WACC of 7.1% and LT growth of 2.5%) TP of Bt27.5.

3Q24 net profit was Bt701mn, +1% YoY but -43% QoQ, 6% below market estimates on FX loss. Excluding a Bt181mn FX loss (after tax), 3Q24 core profit was Bt883mn, +22% YoY but -27% QoQ, in line with estimates. Behind the rise YoY, higher sales and gross margin and lower SG&A/sales offset higher interest expenses and effective tax rate. The drop QoQ was seasonal.

3Q24 sales. Sales grew 2% YoY on improvement in all units except for PSC. Modern retail supply chain (MSC) revenue grew 3% YoY on store expansion and stable SSS. SSS (excluding B2B sales) was +0.02% (vs +2% YoY in 3Q23 and -1.9% YoY in 2Q24), with some help from the Bt10,000 cash handout to 14.5mn people in late Sep. By sales mix, fresh food sales (18% of sales) grew YoY, but dry food sales (68% of sales) and non-food sales (14% of sales) fell YoY. By format, hypermarket and supermarket sales grew YoY, but dropped YoY at Big C Mini. In 3Q24, it opened a new hypermarket in Yala but closed two hypermarkets in Bangkok after leases ended, opened 11 Big C Mini stores (net of closures and conversion from Big C Foodplace) and 3 Pure drugstores (net of closures) in Thailand. It closed a BigC HK supermarket. Consumer supply chain (CSC) revenue grew 1% YoY on better non-food sales (+3% YoY) upon better personal care (Parrot soap) and OEM sales and new haircare products. Packaging supply chain (PSC) revenue fell 3% YoY on lower can packaging sales (-5% YoY) on low consumption in Vietnam, the flooding in North Vietnam and lower glass packaging sales (-2% YoY) on lower product prices timed to lower raw material costs amid stable sales volume.

3Q24 other items. Gross margin widened 60bps YoY to 19.8% on a better margin in all units: MSC (+10bps YoY) as better inventory & logistics management and a better sales mix, with a rise in portion of sales from high-margin private label products to 13.8% and a fall in low-margin B2B & Donjai sales to 7.8% (vs 8.4% in 3Q23) outpaced more promotional campaigns (for the 14.5mn getting the Bt10,000) in late 3Q24. PSC (+220bps YoY) from lower soda ash and cullet raw material costs, lower natural gas cost and cost-saving initiatives. CSC (+90bps YoY) from more high-margin sales and lower pulp costs. EBIT margin expanded 60bps YoY to 7.3% on a wider gross margin and lower SG&A/sales (-20bps YoY) from lower utility costs, amid stable rental & other income with a higher occupancy rate of 87.9% (vs 86.8% in 3Q23 and 2Q24) and lower instore media and visa-on-arrival income. Interest expenses rose 5% YoY from higher cost of funds. Effective tax rate was 22% (vs 17% in 3Q23 and 22% in 2Q24), as its current retail business structure makes it unable to realize tax loss carried forward.

Key risks are changes in purchasing power, an inflation-led rise in costs and higher interest rate and new government policies. Key ESG risks are energy management, sustainable products (E), and labor/employment practices (S).