Kiatnakin Phatra Securities (KKPS) expects The Erawan Group Public Company Limited (SET: ERW) to post a significant decline in core profit for the second quarter of 2025, with earnings projected to fall 57% year-on-year to THB 54 million.
The anticipated drop is attributed primarily to a slump in non-Hop Inn RevPAR, which is forecast to slide 13% year-on-year, in part due to a lower occupancy rate of 72% compared to 80% a year earlier as Thailand continues to see sluggish inbound tourism.
Within its portfolio, the impact is concentrated in Hop Inn’s Thailand operations, though the overall Hop Inn segment is expected to display strength. Hop Inn revenue is forecast to surge 15% year-on-year in 2Q25, buoyed by robust momentum in Japan—where revenues are projected to jump between 20% and 24%.
Hop Inn’s properties in Thailand and the Philippines should also maintain healthy growth, rising 15% and 12%, respectively, on the back of increased room capacity.
Overall, total revenue for the quarter is estimated to recede by 6% from the prior year, while EBITDA margins are set to edge down to 28% from 30%. The combination of lower occupancy and compressed margins is seen as the main driver of the company’s declining profitability.
Looking ahead, a rebound is anticipated in the third quarter as non-Hop Inn occupancy rates are expected to recover to 77-79% in July, a slight improvement from the 72% recorded in the previous quarter and closing in on last year’s 79%.
This should narrow the year-on-year decrease in RevPAR for non-Hop Inn properties to around 3-5% in July. Renovations for the Grand Hyatt Erawan Hotel, initially slated for the third quarter, have been postponed due to design delays and are now scheduled for the fourth quarter.
KKPS projects non-Hop Inn RevPAR to slip by 1% in 2025, while Hop Inn revenues are expected to accelerate 20%. Full-year core profit is estimated to dip by 3% to THB 877 million.
With ERW shares trading at lean valuations and the prospect of interest rate cuts on the horizon, the firm stands to benefit thanks to its high proportion of baht-denominated, floating-rate loans. Every 25-basis-point reduction in rates could lower annual interest expenses by around THB 25 million—equal to 3% of estimated 2026 profit.
As a result, KKPS reiterates a ‘Buy’ rating on ERW, setting a target price at THB 3.00 per share.
