We believe that management is now more upbeat on 4Q22 earnings than before in view of the QoQ stronger export volume and QoQ stable feed costs foreseen in 4Q22. In the absence of low-season impact in 4Q22, we upgraded our 2022 earnings forecast and target price again. Sales and GM will enjoy a QoQ higher momentum starting from 2Q22 through 4Q22. Our TRADING BUY stands, based on the 2022 earnings jump and its cheap valuation—2022 PER of 11.6x (against its long-term mean of 20x).
No seasonality impact for 4Q22 leads us to upgrade 2022 profit
During the analysts meeting on Jun 22, management stated clearly that the 4Q22 operating performance will beat 3Q22, given that the 4Q22 feed costs are likely to sustain at the same level as in 3Q22 and the chicken export volume in 4Q22 will be higher than 3Q22. Moreover, the Vietnamese pork price will recover strongly in 4Q22 led by the full country reopening. Hence, 4Q22 performance will be different from the previous years in which the fourth-quarter core profit will drop QoQ due to the low season (related to the Vegetarian Festival), lower chicken export volume (in which the high export season will end Dec 20) and the booking of bonuses and various accounting expenses. It is likely that the Thai livestock prices will sustain high or retreat only slightly during the Vegetarian Festival this year (Sep 25-Oct 4, 2022). Due to the expanded 4Q22 earnings expectations, we raised our 2022 net profit forecast again by 14% (to Bt3.2bn) to factor in higher GM (from 15.3% to 16.5%) and lifted YE22 PER-based target price by 14% (to Bt9.25).