CPALL – 3Q26F: CPAXT one-off losses weigh on earnings

We estimate 3Q26F net profit of Bt6.1bn, -8% YoY and -19% QoQ. Excluding Bt1.1bn in one-off store closure expenses from CPAXT (based on CPALL’s 60% stake), we estimate 3Q26F core profit at Bt7.1bn, +10% YoY but -4% QoQ, supported by stronger CVS sales, a healthy gross margin and controlled SG&A expenses, partly offset by weaker CPAXT earnings. We cut our 2026F/2027F earnings by 4%/1%, reflecting lower earnings forecasts for CPAXT, but expect a recovery in 4Q26. Key risks to CPAXT’s contribution are continued B2C SSS pressure from Thai Help Thai Plus in Oct-Nov and full-quarter Habitat losses. We stay OUTPERFORM with a new mid-2027 DCF-based TP of Bt60 (WACC 7.2%, LTG 1.5%), from Bt65 following our earnings revisions.

3Q26F net profit of Bt6.1bn, -8% YoY and -19% QoQ. Excluding Bt1.1bn in one-off expenses from CPAXT related to a B2B store closure in Cambodia and selected loss-making B2C store closures in Thailand (based on CPALL’s 60% stake), we estimate 3Q26F core profit at Bt7.1bn, +10% YoY but -4% QoQ. YoY growth will be driven by stronger CVS sales, a healthy gross margin and controlled SG&A, more than offsetting weaker CPAXT earnings, while the QoQ decline reflects seasonality.

3Q26F CVS highlights. We expect CVS SSS growth of 2% YoY in 3Q26F (vs. +0.8% YoY in 2Q26), with positive SSS growth in every month of the quarter. Jul SSS growth was above the quarterly average, supported by long holidays, higher travel activity and hot weather. Growth moderated in Aug due to heavy rainfall, which weighed on store traffic, before recovering close to Jul levels in Sep, supported by strong customer response to the Monchhichi stamp campaign and stockpiling demand in flood-affected areas toward end-Sep. We estimate 150 new store openings in Thailand, bringing the total store count to 16,434 at end-3Q26 (+4% YoY, +1% QoQ). CVS gross margin is set to widen 5bps YoY, backed by a stronger product mix (+20bps YoY) from higher-margin RTE and beverage products, partly offset by higher transportation costs from rising oil prices (a Bt10/liter increase in diesel prices could raise transportation costs by 15bps of sales, based on CPALL guidance). SG&A/sales will be under control, with controlled electricity expenses helping offset higher costs associated with store expansion.

3Q26F CPAXT highlights. We estimate 3Q26F core profit at Bt1.56bn, down 16% YoY and 17% QoQ. The YoY decline will be mainly due to: 1) B2C SSS contraction of 5% YoY, pressured by Thai Help Thai Plus and fragile consumer spending in Thailand, partly offset by positive SSS in Malaysia, while B2B SSS improved 0.5% YoY; 2) higher SG&A/sales, up 60bps YoY, driven by higher personnel costs and last-mile delivery expenses to support B2B O2O growth, as well as Habitat-related expenses in B2C. These factors will more than offset a 10bps YoY improvement in gross margin, supported by better pricing and shrinkage management across B2B and B2C, as well as higher fresh food prices in B2B. The QoQ decline mainly reflects seasonality.

Earnings revision and outlook. We cut our 2026F/2027F earnings by 4%/1%, reflecting one-off expenses at CPAXT and weaker-than-expected B2C SSS. We expect CPALL’s earnings to grow YoY and QoQ in 4Q26, supported by positive CVS SSS and a healthy margin, along with improving sales and margins at CPAXT. Key risks at CPAXT remain continued B2C SSS pressure from Thai Help Thai Plus in Oct-Nov and Habitat losses in its first full quarter of operations.

Key risks are changes in government policies and purchasing power. Key ESG risks are energy & waste management, sustainable products (E) and product quality management, labor practices and data privacy (S).