Finansia Syrus Securities (FSS) has a negative outlook for contractors in the construction segment following the approval of increasing the minimum wage in Bangkok, which could result in rising costs.
Thailand’s Wage Committee has approved an increase of the minimum wage in Bangkok to 400 baht per day, effective July 1, 2025, up from the current rate of 372 baht per day (which took effect on January 1, 2025). This represents a 7.5% increase. The decision is seen as a negative sentiment for the contractor sector, which is highly labor-dependent. However, a fundamental assessment suggests that the impact on forecast profit for the sector will be limited.
Analysts estimate that the wage hike, which will be in effect for the remaining six months of 2025, will result in a 2% decline in profit for CK (CH. Karnchang), STECON (Sino-Thai Engineering & Construction), and SEAFCO; and a 3% drop for PYLON, assuming 40% of employees currently earn less than the new minimum wage. For the full year of 2026, the negative impact on profits is estimated to be 3% for CK and SEAFCO, 4% for STECON, and 5% for PYLON.
Major contractors like CK and STECON have substantial exposure in the Bangkok area, accounting for 62% and 50% of their current backlog, respectively. Though heavily involved in these areas, both companies mainly rely on subcontracting: 65-70% of CK’s and 30% of STECON’s total costs are through subcontracts, which are secured via advance agreements for the entirety of projects. This practice limits the risk of cost volatility. Labor costs account for approximately 7% and 10% of total costs for CK and STECON, respectively.
Foundation contractors like SEAFCO and PYLON face a slightly higher labor cost ratio, accounting for 15-20% of their overall costs. However, their projects are typically short-term in nature, mostly lasting between three to six months, allowing them to adjust project prices more swiftly to reflect higher costs.
Despite the wage increase, the actual impact may be less significant than projected, as the majority of companies already pay above the current minimum wage.
