AOT – Preview 4QFY24: Earnings uptrend

We estimate AOT’s core earnings for 4QFY24 (July-September 2024) at Bt4.1bn, up 14% YoY (growing international passengers) but down 10% QoQ (lower concession revenue). Earnings will be stronger YoY and QoQ in 1QFY25 from Thailand’s high tourism season with positives including China’s Golden Week and an increase in weekly seat capacity between Thailand and India. Over the past month, AOT’s share price has increased 7%, lagging the average rise of 12% for tourism plays. AOT is on our top pick list for the tourism sector. We rate Outperform with an end-2024 DCF TP of Bt70/share.

Preview 4QFY24: Int’l pax growth to drive earnings up. We estimate AOT’s core earnings for 4QFY24 (July–September 2024) at Bt4.1bn, up 14% YoY but down 10% QoQ. Including extra items (FX and impairment losses) in 4QFY23 and 3QFY24, net profit will grow 21% YoY but fall 9% QoQ. Backing the growth is growing international passengers to an estimated 17.8mn in 4QFY24, up 21% YoY and 2% QoQ or 88% of pre-COVID-19 level. The QoQ slip will reflect lower concession revenue after reclaiming commercial areas to improve passenger services (July) and closing duty-free shops for arriving passengers (August).

FY2025 earnings to grow 21% YoY. Note that our 4QFY24 preview suggests international passengers of 72.8mn, slightly below our FY2024 assumption of 74mn. We thus maintain our core earnings forecast of Bt19.3bn (+109% YoY) and expect core earnings of Bt23.3bn in FY2025 (+21% YoY) based on an international passenger forecast of 84mn in FY2025 or 100% of pre-COVID-19 level. In 1QFY25 (October–December 2024), we expect core earnings to grow YoY and QoQ on Thailand’s high tourism season with positives including China’s Golden Week (October 1-7) and an ~20% increase in weekly seat capacity between Thailand and India of 7,000 seats each direction (starting in November). We maintain our Outperform rating with end-2024 DCF TP of Bt70/share, based on WACC at 7.6% and LT growth at 2%. AOT is on our top pick list for the tourism sector.

Expansion to drive long-term growth. AOT is planning to open the third runway at Suvarnabhumi Airport on November 1, 2024, raising flight capacity to 94 flights/hour from 68 flights/hour. The expansion aligns with the recent expansion of SAT-1 which increases passenger capacity to 60mn/year from 45mn/year. Currently, AOT is reviewing the master plan for the development of Suvarnabhumi Airport to bring its ultimate capacity to 150mn/year, expected to finalize in February 2025. For all six airports, AOT plans to raise passenger capacity from 116mn/year to ~250mn/year from 2032.

Risks. Global economic slowdowns that will cut travel demand. We see ESG risks as environmental issues (E) and social issues such as safety (S).