Equity Analysis /
Thailand

Thai Union Group PCL: Lowered 2022 earnings expectations

  • Tuna price spike in Mar 2022—a challenge for branded tuna margin

  • Inflation of various cost items—a challenge to sustain GM

  • Insights into 1Q22—YoY and QoQ weaker core profit

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
7 April 2022

We downgraded our 2022 net profit forecast to factor in the inflation of various cost items manifested in lower GM and higher SG&A expenses. The cost inflation situation will linger in 1H22 before easing in 2H22, giving rise to the improved 2H22 earnings. We downgraded its rating to only TRADING BUY for the anticipated improved earnings and the listing of I-Tail (ITC) in 2H22.

Tuna price spike in Mar 2022—a challenge for branded tuna margin

The mean West Pacific Ocean (WPO) skipjack tuna price jumped to US$1,900/tonne in Mar 2022, the new high since Oct 2017, or up 41% YoY and 15% MoM. This is regarded as high and above the comfort zone of $1,300-1,800/tonne which will lead to repricing with clients. The tuna price rose from $1,300-1,500/tonne (Sept 2020-Oct 2021) to $1,600-1,800/tonne (Nov 2021-Feb 2022). We attribute its recent spike to a jump in the oil price (related to the Russia-Ukraine war) which is the key component of fishing-industry costs, but also to the volatile weather which caused the fish price to leap during Nov 2021-Feb 2022.