Equity Analysis /

Thai Vegetable Oil PCL: Lower GM for SBO anticipated for 4Q22 into 2023

  • GM to weaken QoQ in 3Q22, led by a jump in SB cost …

  • … and a bigger slide QoQ in 4Q22, thanks to lower SBO sales price

  • Target price adjusted for new share dilution of stock dividend

Bualuang Securities
26 September 2022

As the soybean oil (SBO) market price has dropped since its peak in mid-May 2022 and is expected to decline further in 2H22-2023, we therefore believe that TVO’s GM for SBO will start falling in 4Q22. Moreover, its sales price increase for soybean meal (SBM) will not be able to catch up with the jump in its soybean (SB) costs. These factors will lead to a HoH squeeze in 2H22 GM and earnings. This is despite its YoY 2H22 profit jump due to the low 2H21 base comparison. Our HOLD rating stands for its decent dividend yield.

GM to weaken QoQ in 3Q22, led by a jump in SB cost … 

With regard to SBM, we estimate that TVO’s sales volume in 3Q22 will rise 4-5% QoQ (but drop 3% YoY), fueled by the high season of livestock raising (for chicken exports). Its SBM sale price is likely to rise 10% QoQ (and 20% YoY) in 3Q22, led by the solid future contract sales price (60% of which are sold to feed operators).