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TOA Paint Thailand PCL: Welcome recovery in sight

  • Demand recovery
  • Manageable margins
  • Good quarterly earnings outlook

Share price has yet to reflect a strong core earnings recovery forecast of 16% in 2021 (back to pre-COVID-19 level of 2019) and a 12% growth to new high for core profit in 2022, while share price trades at a 2021 PER of 30.2x and 28.2x for 2021, far below 36.0x mean since IPO in 2017. There is a scope of earnings upside from new M&As. Our BUY rating stands for TOA, at a YE21 DCF derived-target price of Bt45 (6.6% WACC and 2% terminal growth).

Demand recovery

TOA is in the early stage of demand recovery, as we forecast sales growth of 8% to record high at Bt17.6bn in 2021 (against 4% slippage in 2020). TOA could deliver good quarterly sales growth YoY in 2Q21-4Q21 (proven all-time high sales in 1Q21) after YoY declines in 1Q20-4Q20). Key drivers are internal effort on sales and marketing activities, demand recovery in Thailand upcountry, and strong demand in Vietnam. Sales growth is driven by key distribution channels (72% sales contribution from retail dealer and 19% modern trade) and products (65% sales from decoration and 32% from non-decoration).  Besides, TOA added ‘Mega Paint’ (shop-in-shop) with the first store of City Home Mart Bong Bon in 1Q21 and targets to achieve 10 shops in 2021.


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