CP All

CP All Plc (CPALL)

8% above estimate: CPALL reported a 1Q12 net profit of Bt2.76bn, up by 32% YoY and 74% QoQ. The figure was 8% higher than our estimate and 12% above the consensus.
Results highlights: SSSG (excluding mobile top-up card sales) was 5.9% for 1Q12, slightly lower than our estimate of 6.5%, as the impact of supply shortages in Jan and Feb was greater than we assumed. However, CPALL accelerated rollout by opening 203 new stores during the quarter (40% of its FY12 target), so the top-line still grew a strong 16% YoY to Bt43bn.
Ticket size was flattish at Bt55, but the ticket count rose 7% YoY to 1,258 ticket/store/day.
Margin was the key factor in CPALL beating our estimate. Product margin expanded by 30 bps YoY to 25.1%, driven by a 60 bps increase in non-food margin to 23.9% brought about by robust sales growth of personal care items for men. Despite some supply disruptions, food margin also fattened 20 bps YoY to 25.5% (we assumed a 10 bps YoY decline), thanks to the rolling out of new ready-to-eat food products to more stores.
Other income fell 7% YoY to Bt1.5bn (but was still higher than our estimate of Bt1.36bn), as CPALL canceled its stamp campaign during Nov-Feb because of the flooding
Outlook: We expect 2Q12 earnings to be very strong, positively surprising the market. The hot season in tandem with the resumption of all merchandise supplies should push SSSG into double-digit territory.
What’s changed? We have upgraded our FY12 earnings forecast by 4% to reflect stronger-than-expected margin expansion. Our YE12 target price, thus, rises to Bt40 from Bt37.50.
Recommendation: Although we like CPALL for its concrete fundamentals and impressive ongoing growth story, its 17.6% share price rally since it we upgraded it to be our top BUY in early April makes its current valuation look stretched (an FY12 PER of 31.9x). Because there is only 4% upside to our (revised up) YE12 target price of Bt40, we have downgraded our rating to HOLD from BUY.