2Q26 Preview: Stable demand; will margins hold?

Research evidence excerpt

2Q26 Preview: Stable demand; will margins hold?

Idea

July 21, 2026 10:31 AM GMT

Morgan Stanley Asia (Singapore) Pte.+MASEAN Consumer and Transportation | Asia Pacific Divya Gangahar Kothiyal

Equity Analyst

2Q26 Preview: Stable demand; Divya.Gangahar@morganstanley.comEileen Lin +65 6834-6438

Research Associate

Eileen.Lin@morganstanley.com +65 6834-5060

will margins hold?

Sales trends should be broadly stable, with a slight uptick in

Thailand for select segments. Margins may begin to show some

weakening from cost inflation (higher fuel prices) and weaker ASEAN Consumer

currency (Indonesia). For SIA, demand remains strong, but we Asia Pacific

Industry View Attractive

expect margins to contract.

SIA (EW): Resilient passenger demand and adjustments in fares should drive a

notable acceleration in revenue growth in 1QF27. Group PLF remained healthy at

87.1% (-50bps y/y), while cargo volumes (+6.6% y/y in 1Q) benefitted from AI-/data

center-related demand, as well as e-commerce (EC) front-loading into the EU.

However, we expect this quarter to reflect the peak impact of higher jet fuel prices

(up >80% q/q assuming one-month lag impact). As a result, we expect OPM to

contract despite assuming double-digit growth in passenger yields and fuel hedge

gains. Air India losses are also likely to remain elevated.

Consumer: Our preferred picks, ASII, CPALL, and JFC, trade at attractive valuations,

with ASII's dividend yield at 8% (2026), while CPALL and JFC trade at a ~30%

discount to their 3-yr average multiples.

Thailand: Tourist arrivals remained 3% lower YTD through July 18, but stimulus

measures, favourable weather, and lower rates supported private consumption

growth in 2Q. CPALL C-store SSSG held steady at 1-2%, but continued weakness at

CPAXT weighed on overall performance.