Equity Analysis /

Thai Vegetable Oil PCL: Flattish GM in 2022 amid surging soybean cost

  • Favorable macro-outlook for the global SB price in 1H22

  • Tumbling margins for crushers amid the SB price surge

  • Normalized GM of 8-12% with flattish SBM sales volume in 2022

Bualuang Securities
3 March 2022

With the recent surge in global soybean (SB) price to its nine- year high of US$17/bushel to date, we believe that soy crushers cannot fully pass on the swift rise of SB cost to customers in the form of the soybean meal (SBM) sales price hike. This is evidenced by the tumbling margins of global soy crushers and TVO’s stable 2022 gross margin (GM) guidance of 8-12% against its GM of 9.5% in 2021, demonstrating that the SB cost hike outpaces the SBM sales price rise. We reiterate our HOLD rating on TVO for a decent dividend yield of 6% in 2022 amid the slight 2022 core profit drop.

Favorable macro-outlook for the global SB price in 1H22 

The firm believes that the global SB price is likely to sustain in the high range of US$15.5-17/bushel within next month (higher than the previous price range of $13-15/bushel if factoring in La Niña impact), given the fresh impact of Russia-Ukraine war tension, and will soften to $15-16/bushel after next month to factor in the next US crop’s bigger 2022/23 planted areas and its larger production starting Jun-Oct 2022. It views that if there is a damage to the upcoming US crop (related to the US weather in 2H22), the price could spike to above $17/bushel.