Market will gain a positive surprise in 2Q20 result (surpassing peers for a profitable 1H20) and quick turnaround to profit in 3Q20 outlook. AU will quickly resume profits after re-opening stores and double earnings forecast in 2021. Share price is at a good bargain level at 13% YTD falling and a 2021 PER of 47.8x, below 56.3x of its long-term mean since IPO in 2016. We prefer AU on high growth potential of new business model (franchises). Our BUY rating stands at a YE21 target price of Bt12.30 (target PER of 68x, 0.5SD above its mean).
AU posted a slight core loss of Bt3m in 2Q20 against its second-best quarterly core profit of Bt63m in 1Q19 and profit of Bt13m in 1Q20. It was ahead of our forecast of Bt12m loss due to better-than-expected of SG&A expenses (58% of sales versus 68% of our forecast).