OSP – 3Q24: Net loss, but 4Q24 to grow YoY, QoQ

We expect 4Q24 to grow both YoY and QoQ from improving sales and extra gain from investment, leading to an estimated drop in 2024 net profit of 21.2% to Bt1.89bn, with core profit of Bt3.1bn (+48.5%). For 2025, we are looking at total revenue growth of 4.3% and core growth of 3.9% with expectation of M&As to support long-term performance. We maintain Outperform with a 2025 target price of Bt29/sh based on 1SD to 5-yr PE of 28x.

3Q24 net loss as expected. OSP reported a 3Q24 net loss of Bt361mn, in line with our forecast of a net loss of Bt384mn, pressured by impairment loss from Myanmar. 3Q24 revenue was Bt6.04bn (-3.7% YoY and -17.7% QoQ) in line with a drop in domestic energy drink sales of 14.7% YoY and 15.2% QoQ on seasonality and the end-3Q24 flooding that pulled down sales in the traditional market. Overseas sales grew 22.3% YoY but fell 44.1% QoQ. Gross margin was 36.1% on lower economies of scale. OSP booked a net impairment loss of Bt1033mn, as expected, from the divestment of OEM glass bottle manufacturing in Myanmar, which had been impacted by worsening political instability, Myanmar currency depreciation, and weakened purchasing power in the business sector. Core profit was Bt672mn (+19.5% YoY but -26.9% QoQ), in line.

Recovery in 2024, with core growth of 48.5%. We expect domestic energy drink sales volume and market share to recover in 4Q24 on seasonality and re-stocking after the floods plus better consumer confidence, bringing 4Q24 core profit up both YoY and QoQ. OSP will book a Bt130mn gain on investment from finalization of the sale of the asset in Myanmar. We forecast 2024F revenue at Bt27.5bn (+5.3%). After adjusting for extra loss in 3Q24 and expected gain in 4Q24, net profit comes to Bt1.89bn (-21.2%), with core profit of Bt3.1bn (+48.5%). We project gross margin at 36.7% from 34.5% in 2023 thanks to lower cost for major materials, economies of scale and higher gross margin from overseas.

2025 business plan with variety of new products. OSP plans organic total revenue growth in the mid single digits in 2025, introducing a variety of new products in all categories. It targets a stable or slight growth in its energy drink market share from 46% in 2024, with expansion in the premium segment (more than Bt10/bottle), introducing Shark at Bt25/can among foreign workers, plus a new flavor in the sparkling energy drink segment.

Risks and concerns. Factors to monitor are: 1) volatile costs for major cost items such as natural gas and sugar, 2) volatility in CLMV market sales volume and monetary policy and 3) recovery in consumption.

ESG key risk. OSP was assigned an “AA” rating in the SET ESG ratings. In 2024-2025, OSP aims to reduce energy consumption and CHG emissions sharply, then reduce by 30% by 2030, achieving carbon neutrality by 2050. ESG risk is in the field of product quality management (S) and customer welfare (S).