ONEE – Facing near-term margin pressure

We attended ONEE analyst briefing last Friday, which had a slightly negative tone due mainly to a weaker-than-expected gross margin outlook in 2H26F from high content costs and a decision to hold content exclusively on oneD. In addition, we do not expect to see any significant tax benefits in 2H26, unlike in 2H25. On a positive note, we still believe revenue growth momentum in 2H26 should stay strong. We revised down our 2026F earnings by 12% to Bt399mn (-11.5% YoY) and maintain NEUTRAL rating with new mid-2027F TP of Bt2.7 (from Bt2.8) based on 15x PE (-1SD). Its decent yield of 5.3% in 2026F should help limit the downside.

Recap 2Q26 results. ONEE reported a 2Q26 net profit of Bt72.9mn, down 15.3% YoY but up 35.7% QoQ. The YoY drop was caused by a lower gross margin, despite strong revenue growth, while the QoQ increase was driven by seasonal factors. Total revenue reached Bt2.2bn, rising 26.3% YoY and 23.4% QoQ. Main growth driver was the Idol Marketing business, which generated Bt1.4bn in revenue, increasing by 75.8% YoY and 31.2% QoQ. Meanwhile, the gross margin fell to 30.9% from 33.8% in 2Q25 and 34.7% in 1Q26 because of higher content costs.

Slightly negative tone at the meeting. We attended an analyst briefing last Friday and came away with a slightly negative view. Although management targets 2026F revenue growth of 10-20% vs 25.7% YoY growth in 1H26, its gross profit margin should be ~30% (with potential room for slight compression to 28-29%) vs 32.8% in 1H26 and 35.1% in 2025 due to high content costs and strategic decision to hold content exclusively on oneD. Additionally, we do not expect to see any significant tax benefit in 2H26 unlike in 2H25. This suggests that its earnings outlook in 2H26F should decline YoY. On the positive note, management is still confident in its Idol Marketing business which makes up 63% of its total revenue and expect its revenue to continue to grow YoY in 2H26F, driven by a heavily packed schedule of major domestic and international concerts.

oneD is a long-term driver, but pressure near-term margin. Regarding the oneD application strategy, management plans to keep 70% to 80% of its content exclusively on the platform to build long-term value. To achieve this, the company is intentionally reducing its high margin external licensing deals with OTT platforms, even though this change will lower short-term gross margins. Currently, oneD is not yet profitable. However, management has a goal to reach 600-700k subs vs ~300k currently, which is expected to generate over Bt100mn in revenue. In the long run, the company views oneD as a key strategy to replace its digital TV license when it expires in 2029. This shift will move the entire business toward a highly stable and consistent subscription revenue model.

Revised down our 2026F forecast. Since its 1H26 earnings accounted for 28% of our previous full-year forecast, we revised down our 2026F earnings by 12% after we lowered our gross margin assumptions. We now expect its 2026F earnings to be Bt399mn, down 11.5% YoY.

Risks and concerns. Weak economic recovery will cause overall advertising spending to drop more than expected. Regarding ESG risks, ONEE is not yet included in SET ESG Ratings, but the company plans to join in the future.