Koraphat Vorachet, the Director of Research and Investment Services at Krungsri Securities, has revealed that retail stocks are poised for positive impacts from the Songkran festival.
This holiday season typically boosts consumer spending, notably benefiting CP Axtra Public Company Limited (SET: CPAXT), the company operating in the consumer goods and beverage sectors. Consequently, CPAXT stocks have potential upside and remain a viable long-term investment.
Yuanta Securities (Thailand) maintains a “Buy” recommendation for CPAXT, setting a target price at THB 32 per share by the end of 2025. Expected normal profit for 1Q25 is estimated at THB 2.7 billion, marking a 7% increase from the same period last year.
This growth is attributed to a same store sales growth (SSSG) of 1.5-2% despite a high base from 2024 due to the leap year. Sales were temporarily affected by an earthquake, yet branch expansion and an 18 basis point increase in gross profit margin from the previous year helped maintain positive expectations.
Compared to the previous quarter, gross profit margin is expected to decrease by 33% due to seasonal factors impacting both sales and margins.
For the wholesale segment (Makro) in 1Q25, revenue is projected at THB 70 billion, a 2% decline from the previous quarter but a 3% increase from the previous year, with SSSG anticipated at 1.5%.
Retail segment (Lotus’s) revenue is expected at THB 55 billion, a 4% quarter-over-quarter and year-over-year increase with SSSG projected at 2%. Notably, sales growth in Malaysian outlets outperformed the Thai operations.
The combined gross margin is expected at 16.4%, a 60 basis point drop from the previous quarter but an 18 basis point rise from the previous year.
Makro’s gross margin is projected to increase by 20 basis points due to an augmentation in the share of private label goods and fresh food bakery products. However, Lotus’s gross margin is expected to remain flat compared to last year.
Selling, General and Administrative expenses (SG&A) are anticipated at THB 17 billion, up 2% from the previous quarter and 4% from the same period last year, aligning with the increase in online sales volume. Financial costs are projected at THB 14 billion, down 1% quarter-over-quarter, but up 0.2% year-over-year.
Looking ahead to 2Q25, performance is expected to moderate due to seasonal patterns, yet continue to show growth from the previous year, supported by government economic stimulus measures such as the third phase of the cash handout expected by the end of 2Q25, increased government expenditure, and expansion plans in both wholesale and retail sectors including online sales growth, which constituted 18% of total sales in 2024.
Synergy benefits are anticipated to materialize gradually, with 1Q25 seeing multiple supplier negotiations and efforts to reduce redundant costs and downsize the organization.
Positive trends in gross profit margin and reductions in SG&A expenses are expected to become more apparent in 2Q25, with clearer impacts felt in the latter half of the year. The company anticipates synergies amounting to THB 5 billion over 2025-2026.
