ADVANC reported 2Q23 results that lined up with INVX and consensus. The biggest development in the quarter was a QoQ improvement in mobile and FBB ARPU, indicating cooling competition, which we expect to continue in 2H23. Cost controls also gave a boost to profitability. We maintain our OUTPERFORM and roll our valuation base to 2024, which raised our DCF-based TP (6% WACC and 2% LTG) to Bt245 (from Bt225).
1Q23 core profit in line with INVX and consensus. ADVANC reported 2Q23 net profit of Bt7.2bn, up 6.3% QoQ and 13.9% YoY. Removing FX gains of Bt22mn, core profit was Bt7.2bn, growing 6.9% QoQ and 11% YoY, lining up with both INVX and consensus. 1H23 core profit is on track at 50.6% of our 2023F. It announced an interim dividend of Bt4/sh (85% payout, 1.8% yield), XD Aug 18.
Core service revenue up YoY. Core service revenue (mobile, FBB and enterprise non-mobile) was Bt33.9bn, increasing 1.1% QoQ and 1.8% YoY. Mobile revenue was Bt29.5bn, up 0.8% QoQ and 1% YoY, backed by the recovery in tourism and easing competition in the mobile segment. The key development is a 1.6% QoQ growth in blended ARPU to Bt213/sub/mth, indicating less competition. Net adds came in at -804.9k, with prepaid net adds of -809.2k on its strategy to focus on quality subscribers. FBB revenue grew 5.4% QoQ and 14.9% YoY to Bt2.9bn, also showing signs of less competition, with ARPU up 1.8% QoQ to Bt414/sub/mth as the starting package is now Bt500/mth from Bt299 in the past. Net adds were 60.5k, bringing total subs to 2.3mn. Handset revenue was Bt7.5bn, down 24.9% QoQ and 15.1% YoY as no big-name model was launched in the quarter, plus weak consumer purchasing power.
Cost of service still on the rise while SG&A is under control. Cost of service was Bt22.3bn, up 1.7% QoQ and 3.3% YoY due to higher network opex (higher electricity cost). SG&A expenses dropped 11.8% QoQ and 13.7% YoY to Bt4.9bn thanks to lower marketing expenses, which fell 21% QoQ and 36% YoY. The QoQ drop was from controlling the cost of advertising and campaigns while the YoY drop reflected last year’s high base following the border reopening.
3Q23F earnings outlook. We expect to see a gradual increase in core profit QoQ and YoY in 3Q23F, driven by ongoing easing in mobile and FBB competition and a broader subscriber base.
Risks and concerns. A resumption in mobile and FBB competition could limit the earnings recovery in 2H23.
PDF Click > ADVANC230808_E
