KGI Securities expected Advanced Info Service Public Company Limited (SET: ADVANC) to enhance its 2024 guidance following the release of its 2Q24 results on August 6, with the market expected to respond positively. The adjustment is driven by better-than-expected 1H24 earnings of THB 17 billion (+26% YoY), accounting for 56% of KGI’s 2024F core profit.
KGI foresees a 3-5% potential upside to the earnings forecast based on robust topline growth and projects ADVANC’s net profit to reach THB 8.7 billion (+21% YoY, +3% QoQ) in 2Q24F due to rational pricing strategies and effective cost management.
The earnings increase on a quarterly basis is attributed to solid mobile and fixed broadband (FBB) revenues, offsetting low season challenges and heightened administrative costs, while enhanced ARPU and cost efficiency are driving the year-on-year earnings growth. ADVANC’s EBITDA margin is expected to improve to 54% in comparison to 52.1% in 1Q24.
Looking ahead to 2H24F, KGI predicts a surge in earnings, particularly in the mobile and FBB segments, driven by market consolidation and synergy effects. Furthermore, ADVANC’s enterprise business is expected to gain momentum in 3Q24 with increased project opportunities from public and private sectors.
ADVANC’s focus on quality growth has led to reduced handset subsidies and improved margins. KGI projected ADVANC’s earnings to remain flat in 3Q24F and reach their peak in 4Q24F, buoyed by high travel seasons and strong gadget sales, particularly driven by iPhone sales.
The analyst maintains an ‘Outperform’ rating for ADVANC with a target price of THB 260.00 per share.
Meanwhile, Maybank Securities (Thailand) anticipates a boost in ADVANC’s core profit for 2Q24 to THB 8.6 billion (+20.6% YoY, +0.3% QoQ), supported by a significant increase in core service revenue and handset margin. The forecasted handset margin of 5.0% in 2Q24 is an improvement from 1.2% in 2Q23 and 4.7% in 1Q24, attributed to reduced handset subsidies by ADVANC.
In 2Q24, Maybank Securities projected ADVANC’s core service revenue of THB 39.7 billion (+17.1% YoY, +0.7% QoQ), with mobile revenue benefiting from increased data usage and adjustments made to prepaid plans in August 2023. Factors contributing to the QoQ growth include rising mobile and fixed broadband (FBB) revenues.
The firm also forecasts an increase in mobile average revenue per user (ARPU) to THB 226/month (+6.2% YoY, +0.5% QoQ) alongside a rise in subscribers, particularly from tourist SIM cards.
Maybank Securities identifies potential upside risks to the FY24 core profit forecast, noting that 1H24E core service revenue and handset margin have already outperformed expectations. Additionally, the forecast of 17.8% EBITDA growth in FY24 has already exceeded ADVANC’s target range of 14-16%.
With strong performance in the first half of the year, the firm believes ADVANC is likely to revise its 2024 guidance upwards following the 2Q24 result announcement on August 6, 2024.
The analyst maintained a ‘BUY’ recommendation on ADVANC based on the following factors: 1) projected 16% core profit growth in FY24E, 2) a 5% yield in FY24E, and 3) the company’s attractive valuation compared to TRUE and other ASEAN telcos, with a target price of THB 257.00 per share.
