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

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Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

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>Yesterday analyst meeting came out with positive tone. We maintain the BUY recommendation based on the target price of Bt55.0 derived from DCF methodology (5.9% WACC and 1.0% TG), implying 48.0x PE’21.</strong></p><div>• Expect 1Q21 earnings to improve both YoY and QoQ, on the back of earnings recognition from 119MWe added in 2020, and improving GPM.</div><div></div><div>• LNG import for use in existing SPP power plants, is expected to commence by 2H21.</div><div></div><div>• Upside from new projects totaling 270MW to be finalized within 2021.</div>

Yesterday analyst meeting came out with positive tone. We maintain the BUY recommendation based on the target price of Bt55.0 derived from DCF methodology (5.9% WACC and 1.0% TG), implying 48.0x PE’21.• Expect 1Q21 earnings to improve both YoY and QoQ, on the back of earnings recognition from 119MWe added in 2020, and improving GPM.• LNG import for use in existing SPP power plants, is expected to commence by 2H21.• Upside from new projects totaling 270MW to be finalized within 2021.

BGRIM: Expect LNG Import to Commence by 2H21

Thematic (Sector/Industry)

<p><strong>BCPG, GUNKUL, GULF top pick growth stocks</strong></p><ul>
<li>
<strong>Earnings upcycle in 2021:</strong> We expect BCPG, GULF and GUNKUL to achieve 15 to 30% net profit growth during 2021 on the back 12 to 30% power generation capacity expansion in 2020-21 period.</li>
<li>
<strong>Declining gas price to support SPP performance:</strong> The industrial user power sales of SPP players BGRIM, GPSC and GULF (accounting 10 to 20% of the revenue) has rebound to pre – COVID 19 levels as of 4Q20.  We expect the declining gas cost (-10% YoY) will help in revamping the GPM and support the sector performance.</li>
</ul><p><strong>EGCO, RATCH top pick value stocks</strong></p><ul>
<li>
<strong>Cheap valuation:</strong> The stock price of EGCO and RATCH faced 70% and 30% fall in 2020 respectively. The stocks are trading very cheap at 9 to 13x PE’21E and having the companies already overcome the COVID-19 impact we believe the price correction has created an investment opportunity.</li>
<li>
<strong>Decent dividend yield:</strong> We expect RATCH and EGCO to pay a decent dividend yield of 3.3 to 4.4% in 2021.</li>
</ul><p><strong>Maintain HOLD rating on BGRIM, EA and GPSC</strong></p><ul><li>We have a positive view on BGRIM and GPSC as the SPP players will benefit from declining gas price. However, due to limit upside from current share price we maintain the HOLD rating. We recommend to HOLD EA, as the stock performance will depend on new EV-ESS business success and valuation demands.</li></ul>

BCPG, GUNKUL, GULF top pick growth stocks

Earnings upcycle in 2021: We expect BCPG, GULF and GUNKUL to achieve 15 to 30% net profit growth during 2021 on the back 12 to 30% power generation capacity expansion in 2020-21 period.

Declining gas price to support SPP performance: The industrial user power sales of SPP players BGRIM, GPSC and GULF (accounting 10 to 20% of the revenue) has rebound to pre – COVID 19 levels as of 4Q20.  We expect the declining gas cost (-10% YoY) will help in revamping the GPM and support the sector performance.
EGCO, RATCH top pick value stocks

Cheap valuation: The stock price of EGCO and RATCH faced 70% and 30% fall in 2020 respectively. The stocks are trading very cheap at 9 to 13x PE’21E and having the companies already overcome the COVID-19 impact we believe the price correction has created an investment opportunity.

Decent dividend yield: We expect RATCH and EGCO to pay a decent dividend yield of 3.3 to 4.4% in 2021.
Maintain HOLD rating on BGRIM, EA and GPSCWe have a positive view on BGRIM and GPSC as the SPP players will benefit from declining gas price. However, due to limit upside from current share price we maintain the HOLD rating. We recommend to HOLD EA, as the stock performance will depend on new EV-ESS business success and valuation demands.

Thailand Power Sector: Overweight-Bright 2021 Performance

<p><strong>Last week's analyst meeting came out in a positive tone. We maintain the BUY recommendation based on the target price of Bt55.0 derived using DCF methodology (5.9% WACC and 1.0% TG), implying 47.0x PE’21.</strong></p><div>• We expect 4Q20 earnings to grow YoY on the back of earnings recognition from 126MWe projects added in 1H20, Improving Industrial user (IU) electricity sales and declining gas cost. While softening QoQ due to seasonal factor and higher SG&amp;A expenses</div><div></div><div>• Positive 2021 earnings outlook as we expect an 18.0% YoY EPS growth from 1) Improving gross profit margin due to declining gas cost (-9.0% YoY) 2) Ful year and partial earnings recognition from 181MWe projects added in 2020-21.</div><div></div><div>• Target to expand power generation capacity to 7.2GW by 2025 (2.0x from present level).</div>

Last week's analyst meeting came out in a positive tone. We maintain the BUY recommendation based on the target price of Bt55.0 derived using DCF methodology (5.9% WACC and 1.0% TG), implying 47.0x PE’21.• We expect 4Q20 earnings to grow YoY on the back of earnings recognition from 126MWe projects added in 1H20, Improving Industrial user (IU) electricity sales and declining gas cost. While softening QoQ due to seasonal factor and higher SG&amp;A expenses• Positive 2021 earnings outlook as we expect an 18.0% YoY EPS growth from 1) Improving gross profit margin due to declining gas cost (-9.0% YoY) 2) Ful year and partial earnings recognition from 181MWe projects added in 2020-21.• Target to expand power generation capacity to 7.2GW by 2025 (2.0x from present level).

Equity Capital Markets

<p><strong>BGRIM reported 3Q20 net profit of Bt500m (-34.4%YoY, -50.8% QoQ). Excluding FX &amp; extraordinary items the core profit was at Bt745m (+10.5% YoY, +4.2% QoQ), marking a new high.</strong></p><div>• The core profit growth was supported by 1) capacity expansion of 123 MW added in 1H20 2) recovery of IU electricity demand and 3) improved profit margin from gas turbine upgrades and declining gas cost.</div><div></div><div>• Positive 2021 earnings outlook on the back of full year earnings recognition from 126 MWe projects COD in 2020, continuing synchronization of IU clients and improving GPM due to declining gas cost.</div><div></div><div>• We expect to 4Q20 earnings to soften due to seasonal weak solar power plant operation and higher SG&amp;A expenses. Thus recommend trading and gradually accumulate the stock by 1Q21</div><div></div><div>• 2020-22E core profit revised up by 8 to 15%.</div><p></p><p><strong>We upgrade our recommendation to BUY from HOLD, based on the new target price of Bt55.0 (from previous Bt47.0). Our valuation is derived using DCF methodology (5.9% WACC and 1.0% TG), implying 47.0x PE’21.</strong></p>

BGRIM reported 3Q20 net profit of Bt500m (-34.4%YoY, -50.8% QoQ). Excluding FX &amp; extraordinary items the core profit was at Bt745m (+10.5% YoY, +4.2% QoQ), marking a new high.• The core profit growth was supported by 1) capacity expansion of 123 MW added in 1H20 2) recovery of IU electricity demand and 3) improved profit margin from gas turbine upgrades and declining gas cost.• Positive 2021 earnings outlook on the back of full year earnings recognition from 126 MWe projects COD in 2020, continuing synchronization of IU clients and improving GPM due to declining gas cost.• We expect to 4Q20 earnings to soften due to seasonal weak solar power plant operation and higher SG&amp;A expenses. Thus recommend trading and gradually accumulate the stock by 1Q21• 2020-22E core profit revised up by 8 to 15%.We upgrade our recommendation to BUY from HOLD, based on the new target price of Bt55.0 (from previous Bt47.0). Our valuation is derived using DCF methodology (5.9% WACC and 1.0% TG), implying 47.0x PE’21.

<p><strong>Today’s conference call with the management came out in a positive tone. We expect the cooperation with PEA ENCOM will help BGRIM to expand the SPP client base and have synergy benefits of unto Bt1.0bn from cost saving and service efficiency.</strong></p><ul>
<li>Expect Bt1.0bn potential cost saving from cooperation with PEA ENCOM during 2020-25 period, including Bt315m initial cost saving in B.Grimm Power (AIE-MTP) project. BGRIM also disposed a 5% stake in 124MW BPAM (a subsidiary) to PEA ENCOM for a value of Bt200m.</li>
<li>The transaction is expected to have slight positive sentiments on share price performance. But, have negligible impact to our DCF based valuation.</li>
<li>Expect the 3Q20 earnings to improve YoY while remain stable QoQ.</li>
</ul><p><strong>We maintain the target price of Bt47, while upgrade our recommendation to BUY (from HOLD) due significant upside from current share price. Our valuation is derived using DCF methodology (6.9% WACC and 1% TG), implying 54x PE’20.</strong></p>

Today’s conference call with the management came out in a positive tone. We expect the cooperation with PEA ENCOM will help BGRIM to expand the SPP client base and have synergy benefits of unto Bt1.0bn from cost saving and service efficiency.
Expect Bt1.0bn potential cost saving from cooperation with PEA ENCOM during 2020-25 period, including Bt315m initial cost saving in B.Grimm Power (AIE-MTP) project. BGRIM also disposed a 5% stake in 124MW BPAM (a subsidiary) to PEA ENCOM for a value of Bt200m.
The transaction is expected to have slight positive sentiments on share price performance. But, have negligible impact to our DCF based valuation.
Expect the 3Q20 earnings to improve YoY while remain stable QoQ.
We maintain the target price of Bt47, while upgrade our recommendation to BUY (from HOLD) due significant upside from current share price. Our valuation is derived using DCF methodology (6.9% WACC and 1% TG), implying 54x PE’20.

BGRIM: Positive Sentiments from Joining Hands with PEA ENCOM

Thailand

B.Grimm Power Public Company Limited operates as a renewable energy company. The Company focuses on the development, financing, construction, and operation of green field power plants. B.Grimm Power also renders electricity distribution, operations, and maintenance services. B.Grimm Power serves clients in Asia.

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B Grimm Power (BGRIM TB)

BGRIM: Expect LNG Import to Commence by 2H21

Yesterday analyst meeting came out with positive tone. We maintain the BUY recommendation based on the target price of Bt55.0 derived from DCF...

Pi Securities PCL, Thailand

Thailand Power Sector: Overweight-Bright 2021 Performance

Power Sector: Overweight-Bright 2021 sector performance. BCPG, GUNKUL, GULF top pick growth stocks. EGCO, RATCH top pick value stocks

Pi Securities PCL, Thailand

BGRIM: Advantage from Declining Gas Cost

Last week's analyst meeting came out in a positive tone. We maintain the BUY recommendation based on the target price of Bt55.0

Pi Securities PCL, Thailand

BGRIM: 3Q20 Core Profit Marked New High

BGRIM reported 3Q20 net profit of Bt500m (-34.4%YoY, -50.8% QoQ). Excluding FX & extraordinary items the core profit was at Bt745m (+10.5% YoY,...

Pi Securities PCL, Thailand

BGRIM: Positive Sentiments from Joining Hands with PEA ENCOM

Today’s conference call with the management came out in a positive tone. We expect the cooperation with PEA ENCOM will help BGRIM to expand the SPP...

Pi Securities PCL, Thailand

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