The YoY rise in the 2Q22 aggregate bottom-line was driven by the release of pent-up demand following the lifting of COVID-related restrictions and because of higher oil prices and a fatter GRM (for O&G stocks). Assuming that multiple global headwinds ease—high commodity prices (exacerbated by the Russia-Ukraine war), global recession risk, China’s economic slowdown (a property market crash and Beijing’s zero-COVID policy)—the ongoing normalization of domestic business and the return of inbound tourism will play crucial roles in driving 2H22 growth.
Our YE22 SET target of 1705 implies a PER of 17.4x (0.6SD above the SET’s 10-year mean) and EPS of 98 for 2022 and 108 for 2023 (the consensus numbers are 102.1 and 109.4, respectively).
2Q22 NPAT jumped 26% YoY and was 6.9% above consensus
The stocks comprising the SET reported aggregate bottom-line growth of 26% YoY and 14% QoQ. The YoY expansion reflected the ongoing business recovery from COVID effects and high O&G earnings. The QoQ rise was driven by spectacular profits in Refinery space and considerably better numbers among tourism-related stocks.
The proportion of SET-listed firms that delivered upside surprises (beating the consensus estimate by more than 5%) was 38%, down slightly from 39% for 1Q22. About 29% of companies posted weaker results than projected (down from 37% that missed the street for 1Q22).
For the stocks under BLS coverage, 2Q22 aggregate non-operational losses were equivalent to 10% of 2Q22 core earnings (versus 2Q21 non-operational gains equaling 17% of aggregate 2Q21 core profit). Operating (core) earnings for the quarter jumped by 75% YoY and 41% QoQ; the aggregate number was 21% above our expectation.
Upward earnings revisions continued, more balanced in Aug
In August-to-date, profit forecast-upsizing has been substantial, triggered by robust 2Q22 results. Transport (traffic recovery), Energy (strong sales volumes, a higher petroleum ASP), and Tourism (sharply higher tourist arrivals) were subject to substantial upgrades. Nevertheless, jitters over the sustainability of consumption amid intensified inflationary pressure prompted forecast-downsizing for the Commerce (slimmer margins for consumer discretionary plays), Finance (heavier provisioning assumptions in anticipation of deteriorating asset quality), and Media (subdued ad spending) sectors.
Earnings revision breadth turned more balanced in August—the proportion of sectors that were subject to earnings forecast upgrades for 2022 (nine of 18 sectors) was equal to the proportion subject to downgrades. We conservatively maintain our top-down 2022 EPS forecast of 98, lower than the consensus projection of 102.1. However, clear evidence of a sustained macro-economic recovery in 2H22 would prompt earnings forecast upgrades.