Our target price for AOT of Bt41 is based on a combination of FY2026E (Sep26) DCF fair value (Bt36/sh), downtown duty-free (Bt3/sh), and Aeropolis (Bt2sh) values. Our assumptions include average WACC of 10.1%, a medium-term international traffic CAGR of 2.2% over 2019-29E, a terminal growth rate of 3% and capex of c.Bt186bn over 2025E-31E (mostly Suvarnabhumi expansion).

Assumed CoE of 10.7% is based on 2.5% Rf, 1.03x mkt beta and 8% Rp. Our forecasts of concession revenue are based on KingPower sharing 20% of revenue, in-line with pre-Covid level. We believe DCF is the most suitable valuation method for AOT. AOT is an infrastructure asset which has a recurring income growth profile while concession lives, capacity limits and required capex plans can be logically estimated.

Key downside risks to achieving our AOT target price include: (i) KingPower’s potentially lower-than-20% revenue sharing could cause further share price correction; (ii) potential tourism weaknesses post pent-up demand period; and (iii) unfavourable changes to policy/strategy from management and Thai government. 

Key upside risks include: (i) sharp reduction in TH10YY, (ii) government changing policies in favour of AOT, such as full aeronautical subsidies for AOT in taking over regional airports and room for non-aeronautical upside; (iii) international traffic overshooting pre-Covid trends; and (iv) no further changes to non-aeronautical revenue structure that draws back investors' confidence in non-aero outlook.