Head of Research, Krungthai XSpring

Waraporn Wiboonkanarak

Head of Research

A full service Thai brokerage

Krungthai XSpring

Krungthai XSpring is a full service broker. The company provides a wide range of investment services such as Securities Brokerage, Derivative Agent Business, Securities Borrowing and Lending, Securities Trading, Underwriting, Financial Advisory, Wealth Advisory, Private Fund Management and International Markets Securities Trading. 

In terms of credibility, Fitch Ratings has assigned Krunghtai XSpring a long-term rating of AA- and a national short-term rating of F1+ with stable outlook.

Equity Bottom-Up

<ul><li>1Q24E is anticipated to represent the low season for both sales and profit margins, aligning with reduced tuna costs and the non-peak sales period typically observed in the first quarter.</li><li>However, sales volume is projected to surge during the peak sales seasons in 2Q-3Q, and an improvement in profit margins is expected in 2H24E.</li><li>While the lukewarm earnings outlook for 1Q24E may exert short-term downward pressure on the share price, it presents an opportune time for investment. </li></ul>

1Q24E is anticipated to represent the low season for both sales and profit margins, aligning with reduced tuna costs and the non-peak sales period typically observed in the first quarter.However, sales volume is projected to surge during the peak sales seasons in 2Q-3Q, and an improvement in profit margins is expected in 2H24E.While the lukewarm earnings outlook for 1Q24E may exert short-term downward pressure on the share price, it presents an opportune time for investment. 

Thai Union Group - 1Q24E Earnings to Increase 12% YoY but Drop 31% QoQ

<ul><li>The 4Q23 and 2023 earnings were in line with our expectation.</li><li>KTX has maintained our positive view on the 2024E core profit, which is expected to grow 30% thanks to the absence of loss contributions from RL.</li><li>TU’s long-term growth prospects are strong, with two-year growth expected at a 16% CAGR. Meanwhile, the tactical view is neutral. </li></ul>

The 4Q23 and 2023 earnings were in line with our expectation.KTX has maintained our positive view on the 2024E core profit, which is expected to grow 30% thanks to the absence of loss contributions from RL.TU’s long-term growth prospects are strong, with two-year growth expected at a 16% CAGR. Meanwhile, the tactical view is neutral. 

Thai Union Group -Net Loss in 2023 Due to Impairment Loss from Investment in RL

<div><div><div><ul><li>Negative view from the analyst meeting: TU revised down its 2023E sales and GPM targets as well as the Capex plan.</li><li>While we expect HoH earnings improvement in 2H23E due to seasonality (but a YoY decline due to the high base of Bt2.5bn in profit in 3Q22 and Bt1.2bn in 4Q22), the likelihood of sustained high tuna prices and lower demand (with a gradual improvement in only some markets) will impede the firm’s profitability.</li><li>Although the current share price implies limited downside risk, we do not see any potential upside. </li></ul></div></div></div>

Negative view from the analyst meeting: TU revised down its 2023E sales and GPM targets as well as the Capex plan.While we expect HoH earnings improvement in 2H23E due to seasonality (but a YoY decline due to the high base of Bt2.5bn in profit in 3Q22 and Bt1.2bn in 4Q22), the likelihood of sustained high tuna prices and lower demand (with a gradual improvement in only some markets) will impede the firm’s profitability.Although the current share price implies limited downside risk, we do not see any potential upside. 

Analyst Briefing - Thai Union Group Plc. (TU) - August 9, 2023

<ul><li>TU reported a 2Q23 net profit at Bt1.0bn (-37% YoY, +1% QoQ). The earnings fell YoY because of a decline in sales as well as a dilution effect after ITC was listed to the SET.</li><li>The 2Q23 earnings beat our forecast by 25% as the GPM of 16.9% was better than our estimate of 16.2%.</li><li>Operating expenses to sales marked at 11.7%, lower than the expectation of 12.6% (approximately Bt400mn), and credit tax expenses exceeded our expectation (by around Bt100mn).</li></ul>

TU reported a 2Q23 net profit at Bt1.0bn (-37% YoY, +1% QoQ). The earnings fell YoY because of a decline in sales as well as a dilution effect after ITC was listed to the SET.The 2Q23 earnings beat our forecast by 25% as the GPM of 16.9% was better than our estimate of 16.2%.Operating expenses to sales marked at 11.7%, lower than the expectation of 12.6% (approximately Bt400mn), and credit tax expenses exceeded our expectation (by around Bt100mn).

Earnings Review - Thai Union Group Plc. (TU) - AUGUST 8, 2023

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<ul>
<li>I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC is a subsidiary of <a href="https://www.smartkarma.com/entities/thai-union-group-pcl" target="_blank" data-smartkarma-citation="entities:161:1" rel="noopener">Thai Union Group (TU TB)</a>. </li>
<li>As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.</li>
<li>In this note, we talk about the not-so-positive aspects of the deal.</li>
</ul>


I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC is a subsidiary of Thai Union Group (TU TB). 
As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
In this note, we talk about the not-so-positive aspects of the deal.


I-Tail Corporation Pre-IPO - The Negatives - Non-Uniform Growth

Thailand

Thai Union Group Public Company Limited produces and exports frozen and canned seafood products including frozen tuna loin, shrimp and cephalopod. The Company also produces canned pet foods from by products of its seafood process.  Additionally, the Company produces fish snack and canned tuna which are marketed locally.

Thai Union Group (TU TB)

Thai Union Group - 1Q24E Earnings to Increase 12% YoY but Drop 31% QoQ

1Q24E is anticipated to represent the low season for both sales and profit margins, aligning with reduced tuna costs and the non-peak sales period...

Krungthai XSpring

Thai Union Group -Net Loss in 2023 Due to Impairment Loss from Investment in RL

KTX has maintained our positive view on the 2024E core profit, which is expected to grow 30% thanks to the absence of loss contributions from RL.

Krungthai XSpring

Analyst Briefing - Thai Union Group Plc. (TU) - August 9, 2023

While we expect HoH earnings improvement in 2H23E due to seasonality (but a YoY decline due to the high base of Bt2.5bn in profit in 3Q22 and...

Krungthai XSpring

Earnings Review - Thai Union Group Plc. (TU) - AUGUST 8, 2023

TU reported a 2Q23 net profit at Bt1.0bn (-37% YoY, +1% QoQ). The earnings fell YoY because of a decline in sales as well as a dilution effect...

Krungthai XSpring

I-Tail Corporation Pre-IPO - The Negatives - Non-Uniform Growth

I-Tail Corporation, an original equipment manufacturer (OEM) in the wet pet food category, aims to list in Thailand in 4Q22. ITC is a subsidiary of...

Sumeet Singh