Kiatnakin Phatra Securities (KKPS) noted in its analysis regarding The Erawan Group Public Company Limited (SET: ERW) that the company’s non-Hop Inn Revenue Per Available Room (RevPAR) is expected to show a noticeable downturn in the second quarter of 2025, primarily due to a decline in Chinese tourists and the consequences of a late-March earthquake.
The analyst predicted a 9-10% year-on-year drop for April and May, with a slight improvement to a 5-6% decline in June. Cumulatively, non-Hop Inn RevPAR is anticipated to decrease by 7-8% year-on-year.
Contrastingly, the Hop Inn portfolio is poised for expansion, driven by strong performance in Japan and the growth of operations in the Philippines and Thailand. Hop Inn’s revenue is projected to rise by 15-20% year-on-year in 2Q25.
While overall revenue for the second quarter is expected to dip by 2-3% year-on-year, and core profit could see a significant year-on-year decline from THB 126 million in 2Q24, profitability is anticipated to remain intact.
Signs of recovery are on the horizon for the third quarter, as occupancy rates (OCC) are set to rebound from 73-74% in April to nearly 80% by June. Further, the previous year’s low base, intensified by a poisoning incident at the Grand Hyatt Erawan in July, suggests non-Hop Inn RevPAR might climb back to low single-digit growth in 3Q25.
For 2025, non-Hop Inn revenue is expected to inch up by 1%, while Hop Inn revenue should surge by 20%, resulting in a 5% overall revenue increase. However, the EBITDA margin is likely to decline to 32.6% from 33.5%, with a 3% reduction in core profit to THB 877 million.
Acknowledging the slowdown in Chinese tourism and the earthquake’s ramifications, profit forecasts for 2025-27 have been adjusted downwards by 20-22%.
The valuation methodology shifted to a Discounted Cash Flow (DCF) approach to better capture post-recovery growth, setting a 2025 DCF-derived price target of THB 3.00 per share, down from the previous THB 3.7, reflecting a 17x P/E valuation.
Despite this, KKPS maintains a ‘Buy’ rating on ERW with shares expected to trade at a mere 12x 2025 P/E, seeing the anticipated 3Q RevPAR resurgence as a short-term boost.
Looking ahead, KKPS also forecasts ERW’s net profit to reach THB 877 million in 2025, THB 959 million in 2026, and THB 1.06 billion in 2027.
