The YoY aggregate 1Q22 earnings expansion was driven by the economic upturn, higher oil prices, and sharply higher healthcare demand. Looking ahead, surges in commodity prices (exacerbated by the Russia-Ukraine war), fallout from China's zero-COVID policy, and higher container freight costs look set to squeeze margins in 2Q22. We forecast strong core earnings growth for 2Q22, thanks to high oil prices, but stripped of Energy- and Chemical-related stocks, core profit will rise much more modestly, which could precipitate a market correction, opening a window to take positions. The good 2H22 profit growth profile stands, supported by a recovery in tourism.
Our YE22 SET target stands at 1705, implying a PER of 17.4x (0.5SD above its five-year mean) and EPS of 98.
1Q22 net profit rose 13% YoY
Aggregate 1Q22 NPAT (BLS coverage) rose by 13% YoY and 7% QoQ. Core profit jumped by 39% YoY and 20% QoQ. The major sectors that posted notable YoY growth were Healthcare (higher revenue from COVID-related services), Shipping (higher freight rates), Electronics (higher sales and a weaker baht), Energy (higher oil prices and a fatter GRM), Chemical (greater sales volume, fatter spreads for several of IVL’s products), Consumer (recoveries in same-store-sales, expanded EBIT margin), Bank (decent loan growth, lower expenses). Aggregate net earnings were 6.3% above our estimate (and beat the consensus by 6.0%), while core earnings were 10% above our expectation.