Thai Vegetable Oil PCL: Higher 2Q21 earnings expectations

  • Enhanced earnings expectations for 2Q21
  • US SB stocks to tighten through mid-2022
  • Tightening global soy oil stocks; sustained low palm oil stocks

We expect TVO’s YoY earnings growth to remain robust from 2Q21 through 4Q21 and have lifted our 2Q21 earnings forecast in light of stronger sales and GM. Given the tight 2021/22 US SB stocks through mid-2022, the anticipated severe US weather events in the Midwest in Jun-Jul and the stronger La Niña weather condition in 4Q21-1Q22, soybean will still be a good call. Our TRADING BUY stands, based on its 2021 profit jump and a high dividend yield.

Enhanced earnings expectations for 2Q21

We have now raised our 2Q21 net profit expectations for TVO by 19% from Bt630m to Bt750m (up a robust 120% YoY but down 15% QoQ), and our 2Q21 core profit forecast by 18% from Bt650m to Bt770m (up 110% YoY but down 11% QoQ), underpinned by higher sales and GM assumption than our previous forecast. We ignore a QoQ comparison between 2Q21 and 1Q21 due to the super-high 1Q21 GM base comparison arisen from very cheap SB cost and a large scale of SBM sales price increase in 1Q21 during which both SBM and SB prices rose steeply. However, GM will be robust at 14.5% in 2Q21, up from 10.9% in 2Q20 (but down slightly from 16.3% in 1Q21), driven by a YoY rise in its SBM sales price outpacing a YoY rise in its SB cost. We model sales of Bt8.5bn in 2Q21, up a robust 48% YoY and 10% QoQ, led by a jump in SBO sales volume and sales price increases for both SBM and SBO.

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