Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

Thai Foods Group Public Company Limited / Equity Bottom-Up

<ul><li>The 4Q23 and 2023 earnings marked bigger-than-expected losses owing to downbeat margins and higher-than-expected operating expenses.</li><li>Looking ahead, the potential earnings recovery is likely to be slow.</li><li>KTX maintains a Neutral rating, with a fair value of Bt3.49, based on a required rate of return of 7.9%. </li></ul>

The 4Q23 and 2023 earnings marked bigger-than-expected losses owing to downbeat margins and higher-than-expected operating expenses.Looking ahead, the potential earnings recovery is likely to be slow.KTX maintains a Neutral rating, with a fair value of Bt3.49, based on a required rate of return of 7.9%. 

Thaifoods Group -4Q23-2023 Earnings Worse than Expected

<ul><li>TFG reported a 2Q23 net profit of Bt69mn, 25% better than expected.</li><li>Excluding the extra loss of Bt160mn (FX loss of Bt15mn, a loss from the change of financial asset valuation of Bt87mn, an impairment loss under accounting standards of Bt28mn, and a loss from the change in the fair value of biological assets of Bt30mn), the firm reported a core profit of Bt229mn (-85% YoY, -55% QoQ), 22% better than our projection of Bt155mn.</li><li>The upbeat earnings were thanks to tax credit income of Bt18mn, which was better than our projection by around Bt70mn — we expected tax expenses of Bt52mn.</li></ul>

TFG reported a 2Q23 net profit of Bt69mn, 25% better than expected.Excluding the extra loss of Bt160mn (FX loss of Bt15mn, a loss from the change of financial asset valuation of Bt87mn, an impairment loss under accounting standards of Bt28mn, and a loss from the change in the fair value of biological assets of Bt30mn), the firm reported a core profit of Bt229mn (-85% YoY, -55% QoQ), 22% better than our projection of Bt155mn.The upbeat earnings were thanks to tax credit income of Bt18mn, which was better than our projection by around Bt70mn — we expected tax expenses of Bt52mn.

Earnings Review - Thaifoods Group Plc. (TFG)

Thematic (Sector/Industry)

<ul><li>The projected outlook for agricultural and food businesses in 2Q24E indicates a notable recovery both YoY and QoQ.</li><li>In particular, major meat operators, including those engaged in the swine business in Vietnam, are anticipated to shift from losses in 2Q23 to profits, with further growth expected from their reported better-than- expected operating results in 1Q24.</li><li>Consequently, we have revised our profit forecasts upward for CPF, TFG and SAPPE. While acknowledging the sector's rebound in operating results, driving up share prices, we maintain a Neutral rating due to stretched valuations, as indicated by the earnings yield method. </li></ul>

The projected outlook for agricultural and food businesses in 2Q24E indicates a notable recovery both YoY and QoQ.In particular, major meat operators, including those engaged in the swine business in Vietnam, are anticipated to shift from losses in 2Q23 to profits, with further growth expected from their reported better-than- expected operating results in 1Q24.Consequently, we have revised our profit forecasts upward for CPF, TFG and SAPPE. While acknowledging the sector's rebound in operating results, driving up share prices, we maintain a Neutral rating due to stretched valuations, as indicated by the earnings yield method. 

Agri & Food: Momentum in 2Q24E Expected to Grow YoY and QoQ

<ul><li>The Thai swine industry is anticipated to face continued challenges this year, though not as severe as the difficulties encountered in 2023.</li><li>During that period, major operators experienced losses due to rising costs and declining prices, exacerbated by an influx of illegal swine supply and further compounded by sluggish consumption.</li><li>In 1H24E, domestic swine supply is projected to stabilize, with excess supply gradually diminishing.</li></ul>

The Thai swine industry is anticipated to face continued challenges this year, though not as severe as the difficulties encountered in 2023.During that period, major operators experienced losses due to rising costs and declining prices, exacerbated by an influx of illegal swine supply and further compounded by sluggish consumption.In 1H24E, domestic swine supply is projected to stabilize, with excess supply gradually diminishing.

Meat Sector – Thai Swine Prices to Recover in 2H24E

<div><div><div><ul><li>KTX switched our rating to Neutral. Our valuation metrics suggest that the share price is fully valued, but the long-term view on growth is positive.</li><li>The new fair value is Bt4.02, based on the earnings yield and a required return of 7.1%. The tactical view shows limited downside risk after the share price fall of 25% YTD.</li><li>However, the 3Q23E earnings may be lower than expected if swine prices fall further, posing downside risk to the share price. </li></ul></div></div></div>

KTX switched our rating to Neutral. Our valuation metrics suggest that the share price is fully valued, but the long-term view on growth is positive.The new fair value is Bt4.02, based on the earnings yield and a required return of 7.1%. The tactical view shows limited downside risk after the share price fall of 25% YTD.However, the 3Q23E earnings may be lower than expected if swine prices fall further, posing downside risk to the share price. 

COMPANY UPDATE - Thaifoods Group - July 27, 2023

Thailand

Thaifoods Group Public Company Limited is the manufacturer and processor of poultry and swine products. The Company's business involves hatcheries, contract farming, raw chicken meat processing for export, and domestic distribution. Thaifoods Group operates in Southeast Asia.

Thai Foods Group Public Company Limited (TFG TB)

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Thaifoods Group -4Q23-2023 Earnings Worse than Expected

The 4Q23 and 2023 earnings marked bigger-than-expected losses owing to downbeat margins and higher-than-expected operating expenses.

Krungthai XSpring

Earnings Review - Thaifoods Group Plc. (TFG)

The upbeat earnings were thanks to tax credit income of Bt18mn, which was better than our projection by around Bt70mn — we expected tax expenses of...

Krungthai XSpring

Agri & Food: Momentum in 2Q24E Expected to Grow YoY and QoQ

In particular, major meat operators, including those engaged in the swine business in Vietnam, are anticipated to shift from losses in 2Q23 to profits

Krungthai XSpring

Meat Sector – Thai Swine Prices to Recover in 2H24E

The Thai swine industry is anticipated to face continued challenges this year, though not as severe as the difficulties encountered in 2023.

Krungthai XSpring

COMPANY UPDATE - Thaifoods Group - July 27, 2023

KTX switched our rating to Neutral. Our valuation metrics suggest that the share price is fully valued, but the long-term view on growth is positive.

Krungthai XSpring