CP All Public Company Limited (CPALL) Sees Strong Growth Prospects in Thailand and Beyond
In a recent analysis, CGS International Securities (Thailand) ltd. (CGSI) highlighted the positive outlook for CP All Public Company Limited (CPALL) during the “CGSI Regional consumer Conference” held on December 4, 2024. The company’s executives shared insights into its growth trajectory, driven by robust same-store sales growth (SSSG) and strategic expansion plans.
CPALL reported SSSG of 4-5% for October-November 2024, attributed to seasonal factors, a surge in foreign tourist numbers, and government economic stimulus measures. These initiatives are expected to boost consumer spending and population movement, further fueling CPALL’s growth.
Branch Expansion and Strategic Growth
CPALL aims to expand its branch network in Thailand to 20,000 stores from the current 15,053 as of September 2024.The company plans to open 700 new branches annually, with a focus on standalone branches. These larger stores, which currently account for about 60% of new openings, offer a wider range of products, including ready-to-eat meals, bakery items, and fresh coffee. While these branches may have a slightly longer payback period,they are seen as a strategic move for long-term growth.
“These larger branches will have a slightly longer payback period, but it is strategic planning to create opportunities for long-term growth,” CPALL executives stated during the conference.
International Expansion: Cambodia and laos
CPALL is also expanding its footprint in cambodia and Laos. As of the third quarter of 2024, the company had 98 branches in Cambodia and 9 in Laos. Branches in Cambodia are now profitable at the store level, prompting CPALL to invest in automation and expand its network to 200-300 branches. In Laos, while operations are still in the early stages, steady progress is being made. CPALL plans to leverage its presence in these markets to collaborate with Thai suppliers and enhance its product offerings.
Product Mix Adjustments and Profit Margins
CPALL is focusing on adjusting its product mix,particularly in ready-to-eat food (RTE) and personal care products,to support profit margins.RTE sales have risen from 25% pre-COVID to 28-29% currently, with a record high of 30% during the high season. The company plans to further increase the proportion of RTE products, aligning with the trend toward healthier and premium offerings.
Non-food product margins also saw a year-on-year increase of 110 basis points in the first nine months of 2024, driven by a decline in cigarette sales and a rise in personal care and high-margin health product sales.
CGSI’s Buy Recommendation and Future Outlook
CGSI’s analysis department maintains a “Buy” recommendation for CPALL, with a target price of 80 baht, based on its strong growth prospects and expanding profit base. Though, potential risks include changes in consumer behavior, regulatory shifts (such as sodium intake controls), and increases in the minimum wage.
On the positive side, CPALL’s faster-than-expected expansion in Cambodia and Laos, along with higher-than-expected profit shares from CPAXT, are seen as key drivers. The synergy between Makro and Lotus’s has also contributed to these positive results.
As CPALL continues to innovate and expand, its strategic moves both domestically and internationally position it as a leader in the retail sector, with important potential for sustained growth.
### **Interview: CPALL’s Strategic Growth and Expansion Plans in Thailand and Beyond**
**Introduction:**
In a recent analysis by CGS International Securities (Thailand) Ltd. (CGSI), CP All Public Company Limited (CPALL) was highlighted for its strong growth prospects, both in Thailand and internationally. the company’s robust same-store sales growth (SSSG) and strategic expansion plans were key topics during the CGSI regional Consumer Conference on december 4, 2024. This interview delves into CPALL’s growth trajectory, branch expansion strategies, international ventures, and product mix adjustments, as discussed by a leading industry expert.
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### **Same-Store Sales Growth and Market Dynamics**
**Senior Editor (SE):** Thank you for joining us today. Let’s start with the recent performance of CPALL. The company reported a 4-5% same-store sales growth (SSSG) for October-November 2024. What factors do you think are driving this growth?
**Specialist Guest (SG):** Absolutely, happy too be here. CPALL’s SSSG is indeed remarkable, and there are several key factors contributing to this performance. First, seasonal factors have played a important role, especially during the high tourist season in Thailand.The surge in foreign tourist numbers has boosted foot traffic in stores, wich is a major driver of sales. Additionally, the Thai government’s economic stimulus measures have encouraged consumer spending and population movement, further fueling CPALL’s growth.
**SE:** That makes sense. How do you see these factors evolving in the coming months?
**SG:** The seasonal boost from tourism is likely to continue, especially as Thailand remains a top destination for international travelers. The government’s stimulus measures are also expected to have a lasting impact, which bodes well for CPALL’s continued growth. Though, it’s critically important to monitor any changes in consumer behavior or economic conditions that could effect these trends.
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### **Branch Expansion and Strategic Growth**
**SE:** Moving on to CPALL’s expansion plans,the company aims to increase its branch network in Thailand to 20,000 stores from the current 15,053.Can you explain the strategy behind this expansion?
**SG:** Certainly. CPALL’s expansion strategy is focused on both quantity and quality. The company plans to open around 700 new branches annually, with a strong emphasis on standalone branches. These larger stores, which currently account for about 60% of new openings, offer a wider range of products, including ready-to-eat meals, bakery items, and fresh coffee. While these branches may have a slightly longer payback period, they are designed for long-term growth and customer engagement.
**SE:** That’s captivating. How do these larger branches differ from the conventional convenience store model?
**SG:** Traditional convenience stores are typically smaller and focus on rapid transactions. The larger standalone branches, conversely, are more like mini-marts, offering a broader selection of products and services. This includes a greater emphasis on fresh and prepared foods, which are increasingly in demand as consumers look for healthier and premium offerings. It’s a strategic move to align with evolving consumer preferences.
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### **International Expansion: Cambodia and laos**
**SE:** CPALL is also expanding internationally, particularly in Cambodia and Laos. What can you tell us about these ventures?
**SG:** Yes, CPALL’s international expansion is a key part of its growth strategy. In Cambodia, the company currently has 98 branches and is already profitable at the store level. This success has encouraged CPALL to invest in automation and expand its network to 200-300 branches. In Laos, while operations are still in the early stages, steady progress is being made. CPALL plans to leverage its presence in these markets to collaborate with Thai suppliers and enhance its product offerings.
**SE:** How do you see the potential for growth in these markets?
**SG:** Both Cambodia and Laos present significant opportunities. Cambodia’s growing economy and increasing urbanization make it a promising market, while laos’s strategic location and emerging middle class offer long-term potential. CPALL’s experience in thailand positions it well to succeed in these neighboring countries.
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### **Product Mix Adjustments and Profit Margins**
**SE:** CPALL is also focusing on adjusting its product mix to support profit margins. Can you elaborate on this?
**SG:** Absolutely. CPALL is placing a greater emphasis on ready-to-eat food (RTE) and personal care products. RTE sales have risen from 25% pre-COVID to 28-29% currently, with a record high of 30% during the high season. This trend is expected to continue as consumers increasingly seek healthier and premium offerings. Additionally, non-food product margins have seen a year-on-year increase of 110 basis points, driven by a decline in cigarette sales and a rise in personal care and high-margin health product sales.
**SE:** How do these adjustments impact CPALL’s overall profitability?
**SG:** These adjustments are critical for maintaining and improving profit margins. By focusing on higher-margin products like RTE and personal care items, CPALL can offset any potential declines in lower-margin categories. This strategic shift not only enhances profitability but also aligns with consumer trends,ensuring sustained growth.
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### **CGSI’s Buy Proposal and Future Outlook**
**SE:** CGSI has maintained a “Buy” recommendation for CPALL with a target price of 80 baht.What do you think are the key drivers behind this recommendation?
**SG:** CGSI’s recommendation is based on CPALL’s strong growth prospects and expanding profit base. The company’s faster-than-expected expansion in Cambodia and Laos,along with higher-than-expected profit shares from CPAXT,are key drivers. Additionally, the synergy between Makro and Lotus’s has contributed to these positive results. Though, potential risks, such as changes in consumer behavior, regulatory shifts, and increases in the minimum wage, need to be monitored.
**SE:** what’s your outlook for CPALL’s future?
**SG:** CPALL’s strategic moves, both domestically and internationally, position it as a leader in the retail sector. The company’s focus on innovation, expansion, and product mix adjustments puts it in a strong position for sustained growth.Provided that it continues to adapt to market trends and manage potential risks, CPALL is well-positioned to achieve its growth objectives.
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**Conclusion:**
CPALL’s growth trajectory, driven by robust SSSG, strategic expansion plans, and product mix adjustments, highlights its leadership in the retail sector. With a strong domestic foundation and promising international ventures, CPALL is poised for continued success in Thailand and beyond.
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This interview provides a extensive overview of CPALL’s growth strategies and market potential, making it a valuable resource for readers interested in the company’s future outlook.
