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

Pi Research

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 upgrade our recommendation to HOLD, from SELL rating, with new 2021E target price of Bt359.00, from Bt343.00, derived from 12.9x PE, which is its 7 years trading average.</strong></p><div>• SCC reported 3Q20 net profit of Bt9.7bn (+57% YoY, +4% QoQ), the drowsy top line was offset by solid petrochemical margin.</div><div></div><div>• We revised up our 2020-22 net profit forecasts by 23%, 5%, and 15%, respectively, mainly reflected an increase in petrochemical spread assumption.</div><div></div><div>• SCC also announced about i) temporary suspension of cement unit in Myanmar, and, ii) shares subscription in AJ’s Private Placement and establishment of Joint-Venture company in Vietnam with AJ. We see insignificant impact from the incidents as they would account for less than 2% of SCC’s assets.</div><div></div><p><strong>The petrochemical spread should be even stronger in 4Q20. However, we expect softened performance for SCC as it has planned shutdown on its MOC unit for 45 days in the quarter. We expected petrochemical profitability to retreat in 2021E, given the resumption of regional petrochemical supply as Covid-19 situation would gradually relieve.</strong></p>

We upgrade our recommendation to HOLD, from SELL rating, with new 2021E target price of Bt359.00, from Bt343.00, derived from 12.9x PE, which is its 7 years trading average.• SCC reported 3Q20 net profit of Bt9.7bn (+57% YoY, +4% QoQ), the drowsy top line was offset by solid petrochemical margin.• We revised up our 2020-22 net profit forecasts by 23%, 5%, and 15%, respectively, mainly reflected an increase in petrochemical spread assumption.• SCC also announced about i) temporary suspension of cement unit in Myanmar, and, ii) shares subscription in AJ’s Private Placement and establishment of Joint-Venture company in Vietnam with AJ. We see insignificant impact from the incidents as they would account for less than 2% of SCC’s assets.The petrochemical spread should be even stronger in 4Q20. However, we expect softened performance for SCC as it has planned shutdown on its MOC unit for 45 days in the quarter. We expected petrochemical profitability to retreat in 2021E, given the resumption of regional petrochemical supply as Covid-19 situation would gradually relieve.

SCC : Strong 3Q20 Thanks to Petrochemical Spread

<p>We downgrade our recommendation to SELL, from HOLD rating, with a new 2021E target price of Bt343.00, from Bt306.00, derived from 13.0x PE, which is its 7 years trading average.</p><ul>
<li>SCC reported 2Q20 net profit of Bt9.4bn (+33% YoY, +35% QoQ).</li>
<li>Solid petrochemical spread helped offsetting the negative impact of weak revenue.</li>
<li>2Q20 revenue was Bt96.0bn (-12%YoY, -9%QoQ)</li>
<li>2Q20 Gross profit margin was 22.8% (+5.1ppts YoY, +3.9ppts QoQ).</li>
<li>SCC announced a dividend payment of Bt5.5 (XD on 13-August-20), which is equivalent to 1.4% upcoming dividend yield.</li>
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</div><p>We expect weaker petrochemical business in 2H20E, given the resumption of regional petrochemical supply, as Covid-19 situation would gradually relieve. In addition, SCC would have planned shutdown on its MOC unit for 45 days in 4Q20 and VCM2 unit for 29 days in 3Q20.</p>

We downgrade our recommendation to SELL, from HOLD rating, with a new 2021E target price of Bt343.00, from Bt306.00, derived from 13.0x PE, which is its 7 years trading average.
SCC reported 2Q20 net profit of Bt9.4bn (+33% YoY, +35% QoQ).
Solid petrochemical spread helped offsetting the negative impact of weak revenue.
2Q20 revenue was Bt96.0bn (-12%YoY, -9%QoQ)
2Q20 Gross profit margin was 22.8% (+5.1ppts YoY, +3.9ppts QoQ).
SCC announced a dividend payment of Bt5.5 (XD on 13-August-20), which is equivalent to 1.4% upcoming dividend yield.

 
We expect weaker petrochemical business in 2H20E, given the resumption of regional petrochemical supply, as Covid-19 situation would gradually relieve. In addition, SCC would have planned shutdown on its MOC unit for 45 days in 4Q20 and VCM2 unit for 29 days in 3Q20.

SCC : Solid Petrochemical Spread Spiked 2Q20 Earnings

<p>We maintain our HOLD rating on SCC with new 1H21E target price of Bt306.00, derived from 12.0x PE, which is its 5 years trading average.</p><div>•We cut 2020E earnings by 16%, to incorporate the impact from Covid-19, which would affect petrochemical and Cement – Building Materials businesses in 2Q20. Meanwhile, we trimmed 2021-22E earnings by 4-6%.</div><div>•SCC reported 1Q20 net profit of Bt7.0bn (-40% YoY, -2% QoQ). The quarter performance was eroded by a weakness in Cement – Building Materials and Petrochemical businesses.</div><div>•Almost flat earnings in 1Q20 was an evidence that impact from Covid-19 has not taken into account yet. We think The partial supply chain disruption should be seen in 2Q-3Q20E for petrochemical and Cement – Building Materials businesses. Also, highly volatile oil price added challenges for the group.</div><p>We expect SCC’s earnings to be bottom in 2Q20E. While, the recovery from the Covid-19 should be seen in 2021E, the weak petrochemical business due to oversupply in the pre-Covid period should still overhang. Thus we maintain our HOLD rating.</p>

We maintain our HOLD rating on SCC with new 1H21E target price of Bt306.00, derived from 12.0x PE, which is its 5 years trading average.•We cut 2020E earnings by 16%, to incorporate the impact from Covid-19, which would affect petrochemical and Cement – Building Materials businesses in 2Q20. Meanwhile, we trimmed 2021-22E earnings by 4-6%.•SCC reported 1Q20 net profit of Bt7.0bn (-40% YoY, -2% QoQ). The quarter performance was eroded by a weakness in Cement – Building Materials and Petrochemical businesses.•Almost flat earnings in 1Q20 was an evidence that impact from Covid-19 has not taken into account yet. We think The partial supply chain disruption should be seen in 2Q-3Q20E for petrochemical and Cement – Building Materials businesses. Also, highly volatile oil price added challenges for the group.We expect SCC’s earnings to be bottom in 2Q20E. While, the recovery from the Covid-19 should be seen in 2021E, the weak petrochemical business due to oversupply in the pre-Covid period should still overhang. Thus we maintain our HOLD rating.

<p>We downgrade our recommendation on SCC to HOLD rating, from BUY, with new 2020E target price of Bt361.00, derived from 12.9x PE, which is PE’20E of its Asia ex Japan’s material peers.</p>
<div>•2020-21E earnings revised down by 38%, mainly reflected a contraction in petrochemical spread.</div>
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<div>•SCC’s 4Q19 net profit was Bt7.1bn (-32% YoY, +15% QoQ). The quarter performance was eroded by a weakness in petrochemical business, whose spreads declined gradually.</div>
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<div>•SCC’s 2019 net profit was Bt32bn (-28% YoY). The down-cycle in petrochemical business was the main factor, eroded both revenue (-9% YoY) and profitability (EBITDA Margin contracted by 1.9ppts to 13.8%)</div>
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<div>•The narrow petrochemical spreads should still erode SCC’s performance in 2020-21E, as the oversupply and weak demand shouldn’t ease rapidly.</div>
<p></p>
<p>The trigger for SCC new bullish cycle should be a recovery in petrochemical spread which largely depends on global economy.</p>

We downgrade our recommendation on SCC to HOLD rating, from BUY, with new 2020E target price of Bt361.00, derived from 12.9x PE, which is PE’20E of its Asia ex Japan’s material peers.
•2020-21E earnings revised down by 38%, mainly reflected a contraction in petrochemical spread.

•SCC’s 4Q19 net profit was Bt7.1bn (-32% YoY, +15% QoQ). The quarter performance was eroded by a weakness in petrochemical business, whose spreads declined gradually.

•SCC’s 2019 net profit was Bt32bn (-28% YoY). The down-cycle in petrochemical business was the main factor, eroded both revenue (-9% YoY) and profitability (EBITDA Margin contracted by 1.9ppts to 13.8%)

•The narrow petrochemical spreads should still erode SCC’s performance in 2020-21E, as the oversupply and weak demand shouldn’t ease rapidly.

The trigger for SCC new bullish cycle should be a recovery in petrochemical spread which largely depends on global economy.

SCC: Overshadow by Weak Petrochemical Spread

<p><strong>SCC 3Q19 net profit of Bt6.2bn (-35% YoY, -12% QoQ). Excluding extraordinary losses of Bt1.7bn, recurring profit was Bt7.9bn (-24% YoY, -13% QoQ).</strong></p>
<div>•3Q19 revenue was Bt110.3bn (-10%YoY, +1%QoQ), The retreat came mainly from a fall in petrochemical selling price.</div>
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<div>•3Q19 EBITDA margin was 15.2% (-2.4ppts YoY, -0.9ppts QoQ). The main pressure came from petrochemical spread contraction.</div>
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<p><strong>We are under-reviewing our forecasts and target price, to reflect a longer than expected downturn in petrochemical business. However, our recommendation would still be a BUY, given that i) strategy for commodity-related stocks is to buy in the down-cycle, and, ii) current PBV trading at 1.6x, the lowest in ten years since Hamburger crisis, seems to be a good entry point for long term investor.</strong></p>

SCC 3Q19 net profit of Bt6.2bn (-35% YoY, -12% QoQ). Excluding extraordinary losses of Bt1.7bn, recurring profit was Bt7.9bn (-24% YoY, -13% QoQ).
•3Q19 revenue was Bt110.3bn (-10%YoY, +1%QoQ), The retreat came mainly from a fall in petrochemical selling price.

 

•3Q19 EBITDA margin was 15.2% (-2.4ppts YoY, -0.9ppts QoQ). The main pressure came from petrochemical spread contraction.

 

We are under-reviewing our forecasts and target price, to reflect a longer than expected downturn in petrochemical business. However, our recommendation would still be a BUY, given that i) strategy for commodity-related stocks is to buy in the down-cycle, and, ii) current PBV trading at 1.6x, the lowest in ten years since Hamburger crisis, seems to be a good entry point for long term investor.

SCC : Still Under the Shadow of Petrochemical Down-Cycle

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)

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Pi Securities PCL, Thailand

SCC : Solid Petrochemical Spread Spiked 2Q20 Earnings

We downgrade our recommendation to SELL, from HOLD rating, with a new 2021E target price of Bt343.00, from Bt306.00, derived from 13.0x PE, which...

Pi Securities PCL, Thailand

SCC: Covid Hit to Limit Upswing

We maintain our HOLD rating on SCC with new 1H21E target price of Bt306.00, derived from 12.0x PE, which is its 5 years trading average.•We cut...

Pi Securities PCL, Thailand

SCC: Overshadow by Weak Petrochemical Spread

We downgrade our recommendation on SCC to HOLD rating, from BUY, with new 2020E target price of Bt361.00, derived from 12.9x PE, which is PE’20E of...

Pi Securities PCL, Thailand

SCC : Still Under the Shadow of Petrochemical Down-Cycle

SCC 3Q19 net profit of Bt6.2bn (-35% YoY, -12% QoQ). Excluding extraordinary losses of Bt1.7bn, recurring profit was Bt7.9bn (-24% YoY, -13%...

Pi Securities PCL, Thailand

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