Following our domestic non-deal roadshow (NDR) with TFG on Jun 14, we sensed a bullish tone from management in anticipation of its robust YoY and QoQ profit jump starting 2Q22 through 3Q22. This will be fueled by further rises of domestic and export chicken prices and of domestic pork price, and the robust export volume, prompting fatter sales and GM through 3Q22. Our TRADING BUY stands, based on the 2022 earnings jump and its cheap valuation—2022 PER of 11.2x (against its long-term mean of 20.9x).
Sustained high Thai pork price through mid-2023
Management views that the recent hike of Thai pork and chicken prices during Apr-Jun 2022 is fundamentally solid and related to tighter livestock supply (exacerbated by the by Russia-Ukraine war and the ban on livestock exports in some countries), a jump in feed costs and a surge in domestic and export demand. The high feed costs have prompted small-to-mid scale pork operators to delay the restocking. It expects the sustained high Thai pork price through mid-2023, given the one-year pig life cycle and the anticipated stable sow herds through mid-2023, and the sustained high Thai chicken price through 2022 in tandem with the sustained high Thai pork price.