Morgan Stanley Expects Tourism to Sustain CRC’s Recovery through 2023

Morgan Stanley increased its forecast for Central Retail Corporation Pcl. (SET: CRC)’s performance in 2023-25 while maintaining an “overweight” rating on the stock, as the recovery momentum of Thailand’s top retailing firm is projected to continue throughout the year.

The faster rebound in the high-margin fashion segment, as well as sustained cost discipline, have been positive factors in CRC’s margin recovery. Therefore, the New York-based bank updated its projection after the first quarter, increasing its EBITDA projections for the years 2023 and 2025 by 1% to 1.5% and its net profit projections by 4% to 5%. 

Morgan Stanley thinks CRC can maintain its outperformance through 2023, boosted by a recovery in tourism in both Thailand and Italy. Prior to Covid-19 pandemic, direct tourist spending accounted for 8-9% of CRC’s revenues. 

Also, the bank said in a Thursday note that CRC’s growth will be driven by a normalization of rental income, particularly in the high-margin fashion sector, and by an expansion of networks.

Over the past two years, CRC has shifted its business strategy to place more focus on, and growth within, the Food and Hardline markets. CRC’s top position in the fashion industry is also bolstered by the company’s strong omni-channel capability, said Morgan Stanley.

Morgan Stanley has set a bullish case target price for CRC at THB60.00, based on greater than expected SSSG, faster than projected network growth, and cost savings. 

In the most likely scenario (base case), which assumes a full recovery in 2023 and further expansion in 2024, the bank has put its target price at THB51.50.