Equity Analysis /
Thailand

Thai Union Group PCL: Weaker 3Q21 core earnings expected; YoY growth to resume in 4Q21

  • Insights into 3Q21—a YoY and QoQ core profit drop

  • Weaker RL and AVANTI’s earnings expected in 3Q21

  • GM expected to be stable YoY in 3Q21

Bualuang Securities
8 October 2021

Despite weaker 3Q21 earnings anticipated YoY and QoQ, we expect 4Q21 earnings to resume YoY growth on the back of greater pet care capacity utilization in 4Q21. We have rolled over our target price to YE22 and derived the new target price of Bt25. Our BUY rating stands based on sustained strong 2022 profit and the potential valuation unlocking from the listing of TFM and I-Tail.

Insights into 3Q21—a YoY and QoQ core profit drop 

We model a Bt1.9bn net profit for 3Q21, down 8% YoY and 19% QoQ. Excluding Bt130m in FX gain in 3Q21, we estimate a Bt1.77bn core profit, down 18% YoY and 21% QoQ. The new forecast is lower than our previous Bt2.2bn 3Q21 core profit estimate due to lower equity income from RL and AVANTI and higher SG&A expenses than modeled. The YoY core profit drop is due to higher SG&A expenses (related to higher freight costs) and a tumble in equity income from both RL and AVANTI, outweighing a marginal rise in sales and flattish GM. We model 3Q21 sales to rise 2.5% YoY (fueled by a jump in frozen seafood sales outweighing a drop in ambient seafood sales and flattish pet care sales) but drop 0.7% QoQ. We estimate GM of 18.2% in 3Q21, stable YoY but down from 19% in 2Q21.