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JPMorgan upgraded Airports of Thailand PCL (AOT:TB) (OTC: AIPUY) from Underweight to Neutral on Wednesday, while lowering its price target to THB28.00 from THB32.00. The company, which boasts impressive gross profit margins of nearly 70%, operates with a moderate level of debt and maintains a healthy current ratio of 1.05.
The upgrade follows an 18% decline in the company’s share price over the past month, compared to a 7% drop in Thailand’s SET index. Year-to-date, the stock has fallen over 54%, significantly underperforming the broader market, primarily due to concession concerns and weak tourist arrivals. According to InvestingPro analysis, the stock is currently trading near its 52-week low, with technical indicators suggesting oversold conditions.
JPMorgan cited the main concessionaire King Power’s request to review its duty-free contracts at all airports, suggesting a renegotiation to lower take-rates is likely. The firm now assumes 2019 concession take-rates as its new base case, resulting in downward revisions to its fiscal year 2026 and 2027 earnings per share estimates by 28% and 27%, respectively. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with a return on equity of 16% and analysts expect continued profitability this year.
The firm stated that while clarity on final take-rates may still be two to three months away, Airports of Thailand’s current share price now reflects JPMorgan’s revised base case following the recent decline.
JPMorgan expects the stock to move in tandem with international passenger volume growth once the concession reset concludes, but does not anticipate the stock returning to its 2013-2024 multiples due to "structurally lower margins and returns on capital."
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