Equity Analysis /
Thailand

Khon Kaen Sugar Industry PCL: More bullish than before

  • Increased global sugar price expectations at 15-18 cents/lb in 2021

  • Scope for sugar price upside from La Niña impact on Brazil’s crop

  • Target price and 2021 earnings upgrade

Bualuang Securities
21 January 2021

Due to our higher global price range expectations at 15-18 cents/lb in 2021, we have lifted our 2021 pricing assumptions for KSL, its 2021 earnings and target price. We are now more bullish on the global sugar price than previously, led by expectations of tighter cane supply from Brazil’s 2021/22 crop due to La Niña intensity in 1H21 and from Thailand’s 2020/21 crop due to the drought in 2019. We believe that the four-year high of current global sugar price above 16 cents/lb offers a TRADING BUY opportunity for KSL.   

Increased global sugar price expectations at 15-18 cents/lb in 2021 

In our Agro-Food: Sugar report on Jan 13, 2021, we have lifted our global sugar price range expectations from 13-15 cents/lb to 15-18 cents/lb in 2021 due to the recent rally of global sugar price to its four-year high of 16.67 cents/lb on Jan 14. The recent price rally to above 16 cents/lb is led by: 1) Brazil’s anticipated lower 2021/22 sugar output assuming the stronger La Niña intensity in 1H21 and 2) Thailand’s expected lower 2020/21 cane output after its first month of crushing. In KSL’s views, the negative factors suppressing the global sugar price are India’s 6m-tonne sugar export subsidy and the slowdown of global economy and sugar consumption due to the new COVID-19 spread while a positive factor is the La Niña impact on Brazil’s cane crop. The firm has raised its price range from 12-15 cents/lb to 13-16 cent/lb. We are now more bullish on this price uptrend cycle in 2021 than the firm is.