4Q24: Slightly above estimates on SG&A
4Q24 core profit was Bt4bn, +22% YoY and +67% QoQ, 6% above estimates on a slower rise in SG&A than expected. Backed by low single-digit SSS growth YoY in 1Q25TD, margin expansion and synergy from amalgamation, 1Q25F is expected to grow YoY. We raise our 2025-27F earnings by 2% each year, factoring in our new synergy assumption of Bt2.6bn (from Bt1.7bn), still more conservative than CPAXT’s Bt5.2bn synergy target in 2025-26F. This resulted in a 3-year earnings CAGR of 16%, above the sector’s 12.5%. We stay Outperform with a new end-2025 DCF TP of Bt36 (from Bt40), raising WACC to 7.6% (from 7.1%, reflecting risks involving the Habitat project, for which we factored in a 2-3% dilution in 2025-27F) amid unchanged LT growth of 2.5%.
4Q24 net profit was Bt4bn, +21% YoY and +103% QoQ, 6% above estimates on a slower rise in SG&A than expected. Excluding Bt55mn amalgamation expenses shows a core profit of Bt4bn, up 22% YoY on better sales and EBIT margin (wider gross margin outpacing higher SG&A/sales) and up 67% QoQ on seasonality. After a 1H24 DPS of Bt0.18, it is paying a 2H24 DPS of Bt0.53 (XD on April 8).
4Q24 highlights. Sales. Consolidated sales grew 3.9% YoY, boosted by growth of 4.6% YoY for B2B and 3.1% YoY for B2C. SSS at B2B in Thailand grew 0.4% YoY (or 2.8% YoY if including the termination of big-lot cigarette sales starting in Oct), while SSS at B2C in Thailand and Malaysia grew 1.9% YoY and 1.6% YoY. Omnichannel sales grew 38% YoY, raising the portion of omnichannel sales to 19.5% (from 14.7% in 4Q23): 25% of sales at B2B and 13% at Bt2C. Gross margin. Consolidated retail & wholesale gross margin widened 70bps YoY to 17% on a widening of margin to 11.9% (+100bps YoY) at B2B and 18.7% (+90bps YoY) at B2C on more high-margin fresh food sales and lower low-margin cigarette sales. EBIT margin grew 50bps YoY as a wider gross margin outpaced higher SG&A/sales (+10bps YoY), with a rise in SG&A (+5% YoY) from faster rise stores and omnichannel expenses than in sales.
Takeaway from meeting. In 2025TD, SSS is growing in the low single digits YoY (even including lower big-lot cigarette B2B sales from a change in policy in 4Q24). CPAXT realized Bt400mn in synergy after amalgamation in 4Q24 (one-third from commercial trade and two-thirds from reduction in personnel and other system expenses). Management continues to target Bt5.2bn in synergy in 2025-26, with Bt2.5bn from a better gross margin (expected to be seen more clearly in 2H25) and Bt2.7bn from lower SG&A (expected to be seen from early 2025 to early 2026).
Management says its investment plan remains unchanged, focusing on retail/wholesale business and adjusting the mall business to create synergy with its current business - creating town centers adjacent to retail/wholesale businesses - and possibly implementing a club model with some membership fees, which has been successful abroad, for the Habitat project. Future additional investment, if any, will focus on ASEAN countries with good economic growth and high potential for expansion, such as and supermarkets in Malaysia, and generating reasonable return on investment with valuation (P/E) for acquisitions less than or equal to CPAXT’s. It has no interest in investing in the convenience store business.
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).
