Citi Research has revised its outlook for Thailand’s energy drinks sector, citing increasing competitive pressures and heightened input cost risks tied to ongoing Middle East tensions. The investment bank has notably shifted to a more negative stance, especially concerning Carabao Group (SET: CBG), while being somewhat more optimistic on Osotspa (SET: OSP).
According to Citi analysts, one of the players in the local energy drinks market has initiated a price rollback, intensifying sector rivalry and threatening the pricing power of established brands. This development comes at a time when the cost of key raw materials like aluminium faces upward pressure.
For Carabao Group, Citi identifies several specific headwinds:
- Margins are expected to be squeezed as revenue shifts toward lower-margin distribution operations.
- Efficiency improvements appear to have plateaued.
- The absence of a hedging strategy for aluminium prices increases the group’s exposure to raw material volatility, potentially impacting future earnings.
In contrast, Osotspa is considered better positioned to weather the industry headwinds. Citi points to Osotspa’s ability to maintain premium product pricing and higher production efficiency, which should help offset some of the cost increases.
Reflecting these dynamics, Citi forecasts a 6% decline in CBG’s core EPS by 2026, while OSP is expected to see a 7% growth over the same period. The latest analyst ratings reflect this divergence: CBG has been downgraded to “Sell” with a target price cut to Bt32 from Bt52, while OSP is downgraded to “Neutral” with a lowered target price of Bt15 from Bt21.
Citi has also reduced target price-to-earnings (PE) multiples for both companies to 12 times, equivalent to roughly 1.5 standard deviations below the average, due to the increasingly challenging competitive landscape and a weaker outlook for earnings growth.
