Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

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Thai Equity - Bottom-up - Equities

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Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<p><strong>We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt442/share, derived from 14.0x PE, which is +0.5 SD of SCC’s 7 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation.</strong></p><div>• SCC delivered impressive performance in 1Q21, driven by all business units.</div><div></div><div>• The solid earnings should be intact in 2Q21.</div><div></div><div>• Management disclosed that SCC is in the process of exploring the feasibility of Chemicals business restructuring, which includes the possibility of SCG Chemicals’ IPO.</div><div>
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</div><p><strong>The chemical business IPO should be a re-rating catalyst for SCC, given it is the largest business in the group. Meanwhile, SCC has proven track record in SCGP spin off.</strong></p>

We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt442/share, derived from 14.0x PE, which is +0.5 SD of SCC’s 7 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation.• SCC delivered impressive performance in 1Q21, driven by all business units.• The solid earnings should be intact in 2Q21.• Management disclosed that SCC is in the process of exploring the feasibility of Chemicals business restructuring, which includes the possibility of SCG Chemicals’ IPO.
 
The chemical business IPO should be a re-rating catalyst for SCC, given it is the largest business in the group. Meanwhile, SCC has proven track record in SCGP spin off.

SCC : On the Way to Unlock Chemical Business’s Value

<p><strong>We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt371/share, derived from 13.0x PE, which is SCC’s 7 years trading average, and, ii) Packaging business at Bt91/share, derived from 15% conglomerate discounted to 21.3xPE, which is equivalent to 1.0x PEG.</strong></p><div>• We expected SCC to report 1Q21 net profit at Bt12.1bn (+74%YoY, +51%QoQ), driven by petrochemical business.</div><div></div><div>• We revised up our 2021-23E net profit forecasts by 21%, 3%, and 2%, respectively, mainly reflected an increase in petrochemical spread assumption.</div><div></div><div>• Last week, HDPE spread was at US$748/ton (+27% from 1Q21) and PP spread was at US$906/ton (+12% from 1Q21).</div><div>
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</div><p><strong>SCC is still a laggard to i) SCGP, its subsidiary whose value was unlocked since the IPO in 4Q20, ii) PTTGC, its petrochemical peer which performed strongly upon solid spread, and, iii) SCCC, its cement peer, whose stock recovered from effective cost control.</strong></p>

We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt371/share, derived from 13.0x PE, which is SCC’s 7 years trading average, and, ii) Packaging business at Bt91/share, derived from 15% conglomerate discounted to 21.3xPE, which is equivalent to 1.0x PEG.• We expected SCC to report 1Q21 net profit at Bt12.1bn (+74%YoY, +51%QoQ), driven by petrochemical business.• We revised up our 2021-23E net profit forecasts by 21%, 3%, and 2%, respectively, mainly reflected an increase in petrochemical spread assumption.• Last week, HDPE spread was at US$748/ton (+27% from 1Q21) and PP spread was at US$906/ton (+12% from 1Q21).
 
SCC is still a laggard to i) SCGP, its subsidiary whose value was unlocked since the IPO in 4Q20, ii) PTTGC, its petrochemical peer which performed strongly upon solid spread, and, iii) SCCC, its cement peer, whose stock recovered from effective cost control.

<p><strong>We maintain HOLD rating, with 2021E target price of Bt359.00, derived from 12.9x PE, which is its 7 years trading average. SCC held analyst conference call yesterday to summarize 4Q20 &amp; 2020 financial performance and update business outlook for year 2021.</strong></p><div>• SCC 4Q20 net profit was Bt8.0bn (+13% YoY, -17% QoQ).</div><div></div><div>• FY2020, SCC’s net profit grew 8% YoY to Bt34bn.</div><div></div><div>• The Covid impact should intact in the early of 2021, before a recovery in the second half, particularly for cement and building materials business.</div><div></div><div>• Petrochemical spread remains strong, but more supply from China and US to global market were seen in Jan-21.</div><div></div><div>• The company budgeted its 2021 CAPEX at Bt65-75bn, with main proportion for LSP petrochemical project in Vietnam.</div><p></p><p><strong>We think the spread retreat in petrochemical business should put some pressure on the stock, as it is the major earning swing factor for the company.</strong></p>

We maintain HOLD rating, with 2021E target price of Bt359.00, derived from 12.9x PE, which is its 7 years trading average. SCC held analyst conference call yesterday to summarize 4Q20 &amp; 2020 financial performance and update business outlook for year 2021.• SCC 4Q20 net profit was Bt8.0bn (+13% YoY, -17% QoQ).• FY2020, SCC’s net profit grew 8% YoY to Bt34bn.• The Covid impact should intact in the early of 2021, before a recovery in the second half, particularly for cement and building materials business.• Petrochemical spread remains strong, but more supply from China and US to global market were seen in Jan-21.• The company budgeted its 2021 CAPEX at Bt65-75bn, with main proportion for LSP petrochemical project in Vietnam.We think the spread retreat in petrochemical business should put some pressure on the stock, as it is the major earning swing factor for the company.

<p><strong>SCC 4Q20 net profit was Bt8.0bn (+13% YoY, -17% QoQ). While the YoY increase came from strong profitability in packaging and petrochemical businesses, the QoQ retreat was due to the loss in cement - building materials business.</strong></p><div>• 4Q20 revenue was Bt97.3bn (-4%YoY, -8%QoQ).</div><div>• 4Q20 EBITDA margin was 17% (+4ppts YoY, -1ppts QoQ), supported by solid petrochemical spread.</div><div></div><div>• SCC’s net profit grew 8% to Bt34bn, mainly driven by packaging business growth and petrochemical business solid margin.</div><div></div><div>• SCC announced dividend payment of Bt8.5/share, XD on 8-Apr-21.</div><div></div><div>• We expect positive momentum QoQ in 1Q21 driven by petrochemical business.</div><div>
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</div><p><strong>We maintain HOLD rating, with 2021E target price of Bt359.00, derived from 12.9x PE, which is its 7 years trading average.</strong></p>

SCC 4Q20 net profit was Bt8.0bn (+13% YoY, -17% QoQ). While the YoY increase came from strong profitability in packaging and petrochemical businesses, the QoQ retreat was due to the loss in cement - building materials business.• 4Q20 revenue was Bt97.3bn (-4%YoY, -8%QoQ).• 4Q20 EBITDA margin was 17% (+4ppts YoY, -1ppts QoQ), supported by solid petrochemical spread.• SCC’s net profit grew 8% to Bt34bn, mainly driven by packaging business growth and petrochemical business solid margin.• SCC announced dividend payment of Bt8.5/share, XD on 8-Apr-21.• We expect positive momentum QoQ in 1Q21 driven by petrochemical business.
 
We maintain HOLD rating, with 2021E target price of Bt359.00, derived from 12.9x PE, which is its 7 years trading average.

SCC : 4Q20 Net Profit Was Bt8.0bn +13% YoY, -17%QoQ

Thematic (Sector/Industry)

<p><strong>Crude: Bright E&amp;P business performance from recovering crude price</strong></p><ul><li>We expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021. <strong> PTTEP is our top pick</strong>, the E&amp;P business will most benefit from recovering crude price.</li></ul><p><strong>Refinery: Improving product demand to drive GRM</strong></p><ul><li>Thai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). <strong>TOP is our top pick </strong>among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).</li></ul><p><strong>Petrochemicals: Benefit from global recovery</strong></p><ul><li>We foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). <strong>PTTGC is our top pick</strong> as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.</li></ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/642/original/SMK1.png?1611645077" class="editor-image img-responsive" data-smartkarma-image-id="184642"></figure><p style="text-align: center;"><strong>Valuation Summary*</strong></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/643/original/Picture1.jpg?1611645252" class="editor-image img-responsive" data-smartkarma-image-id="184643"></figure></section><p style="text-align: center;"><em>Source: CGS Research, Company data, SET</em></p></section>

Crude: Bright E&amp;P business performance from recovering crude priceWe expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021.  PTTEP is our top pick, the E&amp;P business will most benefit from recovering crude price.Refinery: Improving product demand to drive GRMThai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). TOP is our top pick among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).Petrochemicals: Benefit from global recoveryWe foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). PTTGC is our top pick as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.Valuation Summary*
Source: CGS Research, Company data, SET

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

Thailand

The Siam Cement Public Company Limited is a diversified industrial company. The Company's operations include cement manufacturing, petrochemicals manufacturing, paper manufacturing, building product manufacturing, and distribution.

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Siam Cement (SCC TB)

SCC : On the Way to Unlock Chemical Business’s Value

We maintain BUY rating with new 2022E target price of Bt553.00, from Bt462.00, valued from Sum of the Parts valuation, divided to i) Petrochemical...

Pi Securities PCL, Thailand

SCC : The Time Has Come

We upgrade our recommendation to BUY rating, from HOLD, with new 2021E target price of Bt462.00, from Bt359.00, valued from Sum of the Parts...

Pi Securities PCL, Thailand

SCC : Gradually Recover from Covid

We maintain HOLD rating, with 2021E target price of Bt359.00, derived from 12.9x PE, which is its 7 years trading average. SCC held analyst...

Pi Securities PCL, Thailand

SCC : 4Q20 Net Profit Was Bt8.0bn +13% YoY, -17%QoQ

SCC 4Q20 net profit was Bt8.0bn (+13% YoY, -17% QoQ). While the YoY increase came from strong profitability in packaging and petrochemical businesses,

Pi Securities PCL, Thailand

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

Energy Sector : Overweight- Oil demand recovery to drive 2021 earnings. We expect bright E&P business performance from recovering crude price, and...

Pi Securities PCL, Thailand

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