Our TRADING BUY stands, based on its earnings jump in 2022 following its nadir in 3Q21 and its attractive valuation.
Net profit beat our model, but core loss was in line
TFG posted a 4Q21 net profit of Bt142m, down 67% YoY and against a huge net loss of Bt456m in 3Q21. Excluding five extra items in 4Q21—Bt51m FX gain, Bt189m gain on biological assets, Bt16m in asset impairment expense, Bt10m gain from a change in fair value of financial assets and Bt10m in reversal of loss from the land value appraisal—it posted a Bt102m core loss for 4Q21, a reversal from core profit of Bt476m in 4Q20 and shallower by 52% QoQ. Net profit beat our previous expectations of Bt80m net loss due to the above extra gain items while its core loss was consistent with estimates. Sales beat our model by 21% led by higher-than-modeled chicken sales. GM of 8.5% also beat our 7% estimate and was higher than 4.1% in 3Q21, showing that the nadir was reached in 3Q21, followed by a strong QoQ recovery of both GM and its earnings in 4Q21. This was despite the jump in SG&A expense—114% YoY and 54% QoQ—due to a hike in freight rate and logistic costs and the high season for marketing spending.