Equity Analysis /

Thai Vegetable Oil PCL: Further 4Q21 earnings cut led by a big-time maintenance shutdown

  • Big maintenance plant shutdown to deteriorate 4Q21 earnings

  • 4Q21 net profit to weaken both YoY and QoQ

  • 2022 operational guidance—not bullish

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
18 November 2021

TVO’s earnings peaked in 1H21 and deteriorated in 3Q21 with a further weakening seen in 4Q21 (led by the big-time maintenance plant shutdown). Its 1H22 earnings look set to tumble YoY led by the peak 1H21 earnings base comparison and the downtrend of global soybean (SB) price. We revised down its 2021 earnings again to factor in lowered 4Q21 earnings expectation. There is no rush to invest in TVO until after the 1H22 earnings. We maintain our HOLD call on TVO for a decent dividend yield of 6% in 2022.

Big maintenance plant shutdown to deteriorate 4Q21 earnings

Management said that the big-time maintenance plant shutdown (once in a decade) in 4Q21 is likely to suppress 4Q21 sales volumes of both soybean meal (SBM) and soybean oil (SBO) as well as its gross margin (GM) and earnings. It guided that GM in 4Q21 is likely to be close to the level in 3Q21 of 5.5% (which was the lowest since 2Q13) while the 4Q21 net profit is likely to be softer than 3Q21. In light of this, we have lowered our 4Q21 earnings forecast again—from Bt290m to Bt225m net profit and from Bt305m to Bt200m core profit—to factor in lowered GM in 4Q21 (from 10.5% to 5.5%). Hence, we have downgraded our 2021 net profit forecast by 3% (to Bt2.19bn) and our 2021 core profit projection by 5% (to Bt2.02bn) to factor in lower GM assumption (from 11.6% to 10.4%) for 2021. We still maintain our 2022 earnings forecast.