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Kerry Express (Thailand): To succeed, all I need to do is suffer—Muhammad Ali

  • The worst quarter is now behind us
  • Cost-cutting will continue to squeeze competitors
  • Is KEX still a growth stock?

KEX’s aggressive pricing strategy points to an unexciting 2021 core profit. But it will build market share, squeezing its competitors. We expect KEX’s RPP to decline at a slower pace than its CPP in 2022, enabling strong earnings growth. The share price has declined 22% YTD, but the worst quarter is now behind us. We are confident that further downside risk is limited and the stock will rally soon.

The worst quarter is now behind us

Generally, people seem less concerned about Thailand’s third COVID-19 outbreak (hence, less inclined to postpone or pare back consumption) than they were about the first outbreak, so the seasonal pattern of delivery demand should resume in 2021—the first-quarter is typically a low season. KEX’s daily average parcel delivery volume rose 16% YoY in 1Q21, while its costs declined, despite a higher oil price (the market’s key concern). Moreover, the key messages at the firrn’s recent analyst meeting suggest good parcel volume in 2Q21—a sign of QoQ core profit growth. And we expect 2H21 parcel volume to grow HoH, making for a good quarterly profit profile through 2021.


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