Tisco Securities wrote in its research paper that the outlook for the second half of the year for Ichitan Group Public Company Limited (SET: ICHI) looks better than what the analysts had anticipated earlier, primarily on higher u-rate, capacity expansion and an increase in profit margin.
Production capacity utilization rate for ICHI in July-August 24 was at 80% or 100 million bottles per month, showing improvement from the previous quarter. Revenue growth was driven by green tea beverages, herbal drinks under the brand YenYen, healthy trend products, and “Tan San-Su” soda drinks.
Exports in 1H24 were hampered by a shortage of coconut raw materials, but the situation is expected to improve in 2H24. Still, average profit margin for the whole year is expected to be 25%, higher than the original target.
Expansion plans include increasing production capacity from 200 million bottles to 1,700 million bottles with an investment budget of Bt430 million.
Management expects the second half of the year to be slightly weaker than the first half due to production capacity constraints for certain products. Profit margins are forecasted to increase in 2024-26F, supported by product mix improvements and increased production capacity.
Meanwhile, earnings are projected to grow on the healthy beverage trend and introduction of new products. Dividend policy includes payments twice a year, not less than 40% of net profit after tax deduction.
Tisco Securities maintained a Buy recommendation with a new target price of Bt22.
ICHI offers the highest dividend yield in the beverage segment for 2024F at 7.6%, with a lower PER and PBV compared to the sector average. The company has a strong financial position with a low Debt/Equity ratio of 0.2X in 2024F.
Revenue is expected to be close to the target of Bt9 billion for 2024, representing 11% YoY growth. Profit forecasted to grow in 2025-26F, with gross profit margin of 25.5% and improving profit margins in 2024-26F. Tisco Securities expected to see continued revenue growth anticipated in 2025-26F through new product launches and capacity expansion.
Overall, ICHI’s positive outlook, expansion plans, and strategic positioning in the beverage segment make it a compelling investment opportunity with growth prospects and attractive dividend yields.
