4Q20 profit recoveries are manifesting among many sectors, but tourism-related plays continue to lag. Earnings quality improved materially in 3Q20 and we expect further growth for 4Q20, but the recovery may pause in 1Q21, due to fallout from the new COVID outbreak. Laggard and value plays are on the radar, as anticipation of vaccine rollouts ease perceptions of risk. Commodity stocks also look good, led by the crude price uptrend. Progress rolling out vaccinations, further govt stimulus, and an ongoing macro-economic recovery could keep the SET elevated in its upper forward PER band ahead of profit normalization in 2022.
4Q20 SET bottom-line set to rise 22% QoQ (but slide 15% YoY)
We expect the posted 4Q20 aggregate SET net profit to be up 22% QoQ but down 15% YoY (shallower than the 34% YoY plunge for 3Q20). For core earnings, we estimate a dive of 23% YoY but a rise of 6% QoQ. The sectors likely to post YoY core profit growth exceeding 10% are Electronics (strong sales), Agri&Food (higher meat prices, sales and fatter margins) and Chemical (fatter product spreads, greater sales volume), Insurance (both TQM and BLA), and Shipping.