RBF: The Excessive Outperformance May Come to a Halt

We upgrade our recommendation on RBF to HOLD from SELL based on raising our target price of 9.25 from Bt8.70, implying a downside of 9% from the current price. We derive our target price from a 20% premium to the 2020-21E PEG ratio of Thai Consumer Staples due to RBF’s resilient business model.

Investment thesis:

• Aggressive expansion to capture overseas growth opportunities, but already priced in
• Strengthened relationship to Japanese partner enables profit boost
• Improved raw material management enhances cost-efficiency

Interim: As expected, the 2Q20 results underline RBF’s resiliency during an economic downturn. Given the substantial revenue and net profit growth, we become a bit more optimistic for 2020E-2021E, but we still miss a catalyst for further outperformance.

Risks: Slowdown in consumer spending, increased competition, delays and disruptions in production, failure to introduce innovative products, loss of large customers