Krungsri Securities (KSS) expresses a neutral view on Ichitan Group Public Company Limited (SET: ICHI) following its latest analyst meeting. The long-term outlook for the beverage giant remains robust, with no imminent investment cycle anticipated, according to the analyst.
ICHI is expected to maintain sufficient production supply, with capacity increasing by approximately 21% or around THB 2 billion from the current THB 9-9.5 billion. This is due to the new ‘Hon Chuan’ partner factory, scheduled for completion in November, which will handle contract manufacturing for ICHI.
The company noted that the profit margin between in-house and contract manufacturing is comparable, particularly for wide-mouth bottle SKUs that require frequent line changes. The partner plant will specialize its production line to handle such products more efficiently, thereby managing production costs effectively.
Alkaline water remains the company’s ‘third product champion,’ rising to become one of its top two products, surpassing the ‘Yen Yen’ drink. Emphasizing health consciousness and sustainability, alkaline water accounted for 13% of ICHI’s revenue in the first half of 2026.
Current annual depreciation costs of THB 500-600 million are expected to decrease as machinery surpasses 15 years in operation, with a gradual reduction of THB 150 million starting in 2028, and THB 50 million per year from 2029–2032, ultimately settling at about THB 200 million per year.
Tax savings are set to double, following an increase in investment for community and social development initiatives from THB 300 million to THB 421 million. This raises potential tax savings from THB 600 million to THB 842 million, applicable from 4Q25–4Q28, though these additional benefits are still excluded from current projections.
Production challenges, including prolonged machine downtime and overlapping production lines for the alkaline water segment, have led to product shelf shortages starting from 2Q26. Normal operations are expected to resume by September 2026—later than initially anticipated. The company projects modest year-on-year and quarter-on-quarter revenue growth for 3Q26, with utilization increasing to 64% (from 62% in 2Q26).
The peak period is now expected in 4Q26, with a revenue target of THB 9 billion for 2026. Under a worst-case scenario, revenue could fall back to THB 8.6 billion. The fourth quarter is anticipated to be boosted by lower partner stock levels and the return of El Niño conditions, likely from October.
The new flavor for alkaline water is now available in 7-Eleven stores in a 550 ml format, with a sales target of THB 10 million per month. According to Krungsri, the new flavor is milder than previous versions, aligning with customer feedback. Following normalization of production, ICHI plans increased marketing support for its alkaline water line from September onwards. The company is also phasing out the ‘Tan Power’ brand from 7-Eleven due to higher outsourced production costs and disappointing sales results.
Krungsri maintains a ‘Neutral’ view after the meeting, citing ongoing long-term growth drivers over the next three years. Short-term production setbacks have not resulted in significant downside risk to 2026 earnings. Net profit for 3Q26 is expected to be flat or slightly down year-on-year but should recover quarter-on-quarter with expected revenue growth and a slight improvement in gross margin to 24% (up from 23.5% in 2Q26, though down from 25.8% in 3Q25).
Normalized profit for 2026 is maintained at THB 1.26 billion (+5% year-on-year), with net profit down 5% year-on-year. For 2027, profit is expected to rise to THB 1.47 billion (+17% year-on-year), boosted by continued revenue growth, easing costs, and higher operating leverage.
Krungsri has reaffirmed its ‘Buy’ rating with a target price of THB 18.10 per share, based on a PER of 16x. The share price could face short-term pressure following the dividend period and amid unpredictable oil prices due to Middle East tensions. However, the long-term outlook remains positive, and the brokerage sees this as an opportunity for accumulation, with an estimated dividend yield of 7-8%, naming ICHI as a top pick among beverage stocks.
As of 10:51 AM (Bangkok time) on Wednesday, the share price of ICHI gained 2.96% or THB 0.40 to THB 13.90, with a trading value of THB 130.18 million.
