Outperform (17E TP Bt19.90) Company Update
GFPT Outperform (17E TP Bt19.90)
Company Update
Close Bt17.60
Agribusiness May 16, 2017
Earning upgrade/Earnings downgrade/Overview unchanged
Bright broiler export outlook; strong earnings momentum Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.435
1.551
KT ZMICO vs. consensus Share data
6.6%
‐0.1%
Reuters / Bloomberg
GFPT.BK/GFPT TB
Paid‐up Shares (m)
1,253.82
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
22.00/639.00
Foreign limit / actual (%)
49.00/18.95
52 week High / Low (Bt)
19.90/10.70
Avg. daily T/O (shares 000) NVDR (%)
5,520.00 6.87
Estimated free float (%)
44.19
Beta
1.18
URL
www.gfpt.co.th
CGR
Level 2 (Declared)
Anti‐corruption
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
Bright prospects for both broiler export business and earnings The outlook for the Thai broiler export business is promising with more export markets expected in 2017. The raw material prices should remain low while domestic broiler prices should remain strong, continuing to drive profit margin growth. We revised up our 2017‐18E earnings forecasts by 14% and 7%; as a consequence, our 2017E target price has been raised to Bt19.90/share (13x PER). We project 2Q17 earnings growth of 22%YoY. Our “Outperform” rating is maintained. Thai broiler exports expected to grow 3.6% The Thai Broiler Export Association projected Thai broiler export growth of 3.64%YoY to 770,000 tons. The exports of raw products are expected to expand well by 12% to 270,000 tons and those of cooked products are projected to remain flat at 500,000. The export price of frozen products is expected to increase by 5.6% to Bt94/kg while the export price of cooked products is estimated at Bt148.2/kg. Bright price outlook (export and domestic prices) and low raw material costs to support margin While the export price of cooked product is expected to remain flat, the export price of frozen products is expected to rise by over 20% from US$2,200/ton to US$2,800/ton from Jun‐17 onwards. Meanwhile, domestic broiler prices have risen to Bt39‐42/kg (vs. Bt39‐40/kg in 1Q16 and Bt37/kg in 2016) in line with the average price of day‐old chicks that has risen to Bt17.50/share (vs. Bt16.2/share in 1Q16 and Bt13.3/share in 2016). Also, the prices of by‐product chicken have also increased (i.e., the price of chicken bone has risen to Bt20/kg currently). The domestic broiler price outlook is expected to remain in an uptrend for the next 3‐6 months due to the number of day‐old chicks at 33‐34mn chicks/week currently. The figure is expected to fall to 31‐31mn chicks/week in Jun to Jul‐17 due to demand for raising to serve export markets. Meanwhile, raw material (i.e., animal feed) prices should remain low; the corn price is currently standing at Bt8/kg (vs. 8.6/kg in 2016) while the soybean meal price is at Bt16.2/kg (vs. 17.1/kg in 2016), which should be positive to the outlook for operators’ profit margins. Earnings to gain stronger momentum in 2Q17 with expected growth of 22% YoY and 10%QoQ Our preliminary forecast calls for GFPT to see 2Q17E net profit of Bt466mn on the back of better export volume and gross profit margin YoY and QoQ as well as a QoQ increase in profit contributions from affiliates. 2017‐18E earnings forecasts revised up by 14% and 7% With strong 1Q earnings and the bright outlook for broiler business as well as low raw material costs, we have raised our 2017‐18E earnings by 14% and 7% to Bt1.92bn and Bt1.94bn to reflect upwards revisions made to the 2017‐18E gross profit margin assumptions to 15.4% and 15% from 14.0% ‐ 14.3% previously. Financial and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 17,829 1,780 1.42 1.40 17% 0.40 6.89 2014 12.40 10.87 2.56 2.3% 22.4% 38%
2015 16,467 1,195 0.95 0.95 ‐33% 0.25 7.44 2015 18.47 13.47 2.37 1.4% 13.3% 38%
2016 16,693 1,644 1.31 1.31 38% 0.30 8.50 2016 13.43 10.67 2.07 1.7% 16.4% 33%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 18,296 1,916 1.53 1.53 17% 0.46 9.56 2017E 11.52 9.43 1.84 2.6% 16.9% 25%
2018E 18,914 1,940 1.55 1.55 1% 0.46 10.65 2018E 11.37 8.83 1.65 2.6% 15.3% 16%
Thai broiler exports expected to grow 3.6% The Thai Broiler Export Association projected Thai broiler export growth of 3.64%YoY to 770,000 tons (we expect growth of 8% to 800,000 tons). In value terms, total Thai broiler exports are projected at 770,000 tons. The exports of raw products are expected to expand well by 12% to 270,000 tons and those of cooked products are projected to remain flat at 500,000. The growth in export volume of frozen products should be boosted by growing demand for raw chicken meat from Japan and Malaysia (to replace the absent supply from Brazil where quality problems were found). Also, the volume growth may be boosted further by demand from potential markets for exports of raw chicken meat, e.g., South Korea and Singapore. The potential market, i.e., Saudi Arabia (the world’s second biggest importer of broilers with import volume of 0.85mn tons after Japan who imported 0.96mn tons in 2016), is likely to resume imports of raw chicken meat from Thailand. Given growing demand for frozen products, the export price of frozen products is expected to increase by 5.6% to Bt94/kg while the export price of cooked products is estimated at Bt148.2/kg. Earnings to gain stronger momentum in 2Q17 with expected growth of 22%YoY and 10%QoQ The export sales are expected to accelerate in 2Q ahead of the high season in 3Q‐4Q. The export growth will also be boosted by growing demand from clients in Japan and Malaysia who have sought imported products to replace part of the absent supply from Brazil. Given better prices of frozen products following growing demand, better prices of live broilers, better by‐product prices, and low raw material costs, we expect export volume in 2Q17E to remain strong (with both YoY and QoQ growth). The gross profit margin is also expected to increase and the earnings contributions from affiliates are also likely to increase QoQ (contributions from McKey should continue to increase while GFN’s earnings are expected to improve thanks to better by‐product prices). Our preliminary forecast calls for GFPT to see 2Q17E net profit of Bt466mn, up by 22% YoY and 10%QoQ. Should the 2Q17 earnings come out as expected, the firm’s 1H17E net profit is projected to amount to Bt890mn, up 36%YoY on the back of better sales and gross profit margin. Thus, 1H17E earnings growth may be very strong.
Figure 1: 2Q17 earnings preview YE Dec (Bt m) Sales COGS Gross profit SG&A expense Others income EBIT Interest expense EBT Tax expense Equity income MI Norm. profit Extra. Items Net profit EPS (Bt) Gross margin EBIT margin Norm. profit margin
2Q16 1Q17 2Q17E 3,902 4,119 4,285 ‐3,363 ‐3,490 ‐3,608 539 629 677 ‐307 ‐336 ‐332 97 89 60 330 382 405 ‐25 ‐20 ‐20 304 362 385 ‐29 ‐19 ‐21 108 82 104 2 1 2 381 424 466 0 0 0 381 424 466 0.30
0.34
0.37
13.8% 8.4% 9.8%
15.3% 9.3% 10.3%
15.8% 9.5% 10.9%
% YoY %QoQ 1H16 1H17E % YoY 2016 2017E % YoY YTD (% of 2017E) 9.8% 4.0% 7,803 8,404 7.7% 16,693 18,296 9.6% 45.9% 7.3% 3.4% ‐6,816 ‐7,098 4.1% ‐14,191 ‐15,479 9.1% 45.9% 25.6% 7.6% 987 1,306 32.3% 2,502 2,818 12.6% 46.4% 8.3% ‐1.3% ‐601 ‐668 11.2% ‐1,243 ‐1,297 4.4% 51.5% ‐38.4% ‐32.6% 161 149 ‐7.4% 330 323 ‐2.1% 46.1% 22.9% 6.0% 547 787 43.8% 1,589 1,844 16.0% 42.7% ‐102 4.2% 39.9% ‐19.3% 0.0% ‐52 ‐41 ‐21.3% ‐98 26.4% 6.3% 496 746 50.6% 1,491 1,741 16.8% 42.8% ‐29.7% 10.1% ‐49 ‐39 nm ‐206 ‐215 4.3% 18.3% ‐3.5% 26.8% 214 187 ‐12.9% 371 404 8.8% 46.2% 1.9% 72.1% 5 3 ‐37.7% 13 15 17.5% 21.1% 22.3% 9.9% 656 890 35.7% 1,644 1,916 16.5% 46.5% nm nm 0 0 nm 0 0 nm nm 22.3% 9.9% 656 890 35.7% 1,644 1,916 16.5% 46.5% 22.3%
9.9%
0.52
0.71
12.7% 7.0% 8.4%
15.5% 9.4% 10.6%
35.7%
1.31
1.53
15.0% 9.5% 9.8%
15.4% 10.1% 10.5%
16.5%
46.5%
Source: SET and KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 2: 2017‐18E earnings revision Previous Current % Change Bt m 2017E 2018E 2017E 2018E 2017E 2018E Revenues 18,296 18,914 18,296 18,914 0.0% 0.0% Gross margin 14.0% 14.3% 15.4% 15.0% 10.0% 5.3% Equity income 404 444 404 444 0.0% 0.0% Norm profit 1,685 1,813 1,916 1,940 13.7% 7.0% EPS (Bt) 1.34 1.45 1.53 1.55 13.7% 7.0% Source: KTZ Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, TTL, NMG, NUSA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt17.60
Agribusiness May 16, 2017
Earning upgrade/Earnings downgrade/Overview unchanged
Bright broiler export outlook; strong earnings momentum Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
1.435
1.551
KT ZMICO vs. consensus Share data
6.6%
‐0.1%
Reuters / Bloomberg
GFPT.BK/GFPT TB
Paid‐up Shares (m)
1,253.82
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
22.00/639.00
Foreign limit / actual (%)
49.00/18.95
52 week High / Low (Bt)
19.90/10.70
Avg. daily T/O (shares 000) NVDR (%)
5,520.00 6.87
Estimated free float (%)
44.19
Beta
1.18
URL
www.gfpt.co.th
CGR
Level 2 (Declared)
Anti‐corruption
Phornsri Laysanitsaerekul Analyst , no 17621 [email protected] 66 (0) 2624‐6258
Bright prospects for both broiler export business and earnings The outlook for the Thai broiler export business is promising with more export markets expected in 2017. The raw material prices should remain low while domestic broiler prices should remain strong, continuing to drive profit margin growth. We revised up our 2017‐18E earnings forecasts by 14% and 7%; as a consequence, our 2017E target price has been raised to Bt19.90/share (13x PER). We project 2Q17 earnings growth of 22%YoY. Our “Outperform” rating is maintained. Thai broiler exports expected to grow 3.6% The Thai Broiler Export Association projected Thai broiler export growth of 3.64%YoY to 770,000 tons. The exports of raw products are expected to expand well by 12% to 270,000 tons and those of cooked products are projected to remain flat at 500,000. The export price of frozen products is expected to increase by 5.6% to Bt94/kg while the export price of cooked products is estimated at Bt148.2/kg. Bright price outlook (export and domestic prices) and low raw material costs to support margin While the export price of cooked product is expected to remain flat, the export price of frozen products is expected to rise by over 20% from US$2,200/ton to US$2,800/ton from Jun‐17 onwards. Meanwhile, domestic broiler prices have risen to Bt39‐42/kg (vs. Bt39‐40/kg in 1Q16 and Bt37/kg in 2016) in line with the average price of day‐old chicks that has risen to Bt17.50/share (vs. Bt16.2/share in 1Q16 and Bt13.3/share in 2016). Also, the prices of by‐product chicken have also increased (i.e., the price of chicken bone has risen to Bt20/kg currently). The domestic broiler price outlook is expected to remain in an uptrend for the next 3‐6 months due to the number of day‐old chicks at 33‐34mn chicks/week currently. The figure is expected to fall to 31‐31mn chicks/week in Jun to Jul‐17 due to demand for raising to serve export markets. Meanwhile, raw material (i.e., animal feed) prices should remain low; the corn price is currently standing at Bt8/kg (vs. 8.6/kg in 2016) while the soybean meal price is at Bt16.2/kg (vs. 17.1/kg in 2016), which should be positive to the outlook for operators’ profit margins. Earnings to gain stronger momentum in 2Q17 with expected growth of 22% YoY and 10%QoQ Our preliminary forecast calls for GFPT to see 2Q17E net profit of Bt466mn on the back of better export volume and gross profit margin YoY and QoQ as well as a QoQ increase in profit contributions from affiliates. 2017‐18E earnings forecasts revised up by 14% and 7% With strong 1Q earnings and the bright outlook for broiler business as well as low raw material costs, we have raised our 2017‐18E earnings by 14% and 7% to Bt1.92bn and Bt1.94bn to reflect upwards revisions made to the 2017‐18E gross profit margin assumptions to 15.4% and 15% from 14.0% ‐ 14.3% previously. Financial and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm. EPS (Bt) Norm. EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 17,829 1,780 1.42 1.40 17% 0.40 6.89 2014 12.40 10.87 2.56 2.3% 22.4% 38%
2015 16,467 1,195 0.95 0.95 ‐33% 0.25 7.44 2015 18.47 13.47 2.37 1.4% 13.3% 38%
2016 16,693 1,644 1.31 1.31 38% 0.30 8.50 2016 13.43 10.67 2.07 1.7% 16.4% 33%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 18,296 1,916 1.53 1.53 17% 0.46 9.56 2017E 11.52 9.43 1.84 2.6% 16.9% 25%
2018E 18,914 1,940 1.55 1.55 1% 0.46 10.65 2018E 11.37 8.83 1.65 2.6% 15.3% 16%
Thai broiler exports expected to grow 3.6% The Thai Broiler Export Association projected Thai broiler export growth of 3.64%YoY to 770,000 tons (we expect growth of 8% to 800,000 tons). In value terms, total Thai broiler exports are projected at 770,000 tons. The exports of raw products are expected to expand well by 12% to 270,000 tons and those of cooked products are projected to remain flat at 500,000. The growth in export volume of frozen products should be boosted by growing demand for raw chicken meat from Japan and Malaysia (to replace the absent supply from Brazil where quality problems were found). Also, the volume growth may be boosted further by demand from potential markets for exports of raw chicken meat, e.g., South Korea and Singapore. The potential market, i.e., Saudi Arabia (the world’s second biggest importer of broilers with import volume of 0.85mn tons after Japan who imported 0.96mn tons in 2016), is likely to resume imports of raw chicken meat from Thailand. Given growing demand for frozen products, the export price of frozen products is expected to increase by 5.6% to Bt94/kg while the export price of cooked products is estimated at Bt148.2/kg. Earnings to gain stronger momentum in 2Q17 with expected growth of 22%YoY and 10%QoQ The export sales are expected to accelerate in 2Q ahead of the high season in 3Q‐4Q. The export growth will also be boosted by growing demand from clients in Japan and Malaysia who have sought imported products to replace part of the absent supply from Brazil. Given better prices of frozen products following growing demand, better prices of live broilers, better by‐product prices, and low raw material costs, we expect export volume in 2Q17E to remain strong (with both YoY and QoQ growth). The gross profit margin is also expected to increase and the earnings contributions from affiliates are also likely to increase QoQ (contributions from McKey should continue to increase while GFN’s earnings are expected to improve thanks to better by‐product prices). Our preliminary forecast calls for GFPT to see 2Q17E net profit of Bt466mn, up by 22% YoY and 10%QoQ. Should the 2Q17 earnings come out as expected, the firm’s 1H17E net profit is projected to amount to Bt890mn, up 36%YoY on the back of better sales and gross profit margin. Thus, 1H17E earnings growth may be very strong.
Figure 1: 2Q17 earnings preview YE Dec (Bt m) Sales COGS Gross profit SG&A expense Others income EBIT Interest expense EBT Tax expense Equity income MI Norm. profit Extra. Items Net profit EPS (Bt) Gross margin EBIT margin Norm. profit margin
2Q16 1Q17 2Q17E 3,902 4,119 4,285 ‐3,363 ‐3,490 ‐3,608 539 629 677 ‐307 ‐336 ‐332 97 89 60 330 382 405 ‐25 ‐20 ‐20 304 362 385 ‐29 ‐19 ‐21 108 82 104 2 1 2 381 424 466 0 0 0 381 424 466 0.30
0.34
0.37
13.8% 8.4% 9.8%
15.3% 9.3% 10.3%
15.8% 9.5% 10.9%
% YoY %QoQ 1H16 1H17E % YoY 2016 2017E % YoY YTD (% of 2017E) 9.8% 4.0% 7,803 8,404 7.7% 16,693 18,296 9.6% 45.9% 7.3% 3.4% ‐6,816 ‐7,098 4.1% ‐14,191 ‐15,479 9.1% 45.9% 25.6% 7.6% 987 1,306 32.3% 2,502 2,818 12.6% 46.4% 8.3% ‐1.3% ‐601 ‐668 11.2% ‐1,243 ‐1,297 4.4% 51.5% ‐38.4% ‐32.6% 161 149 ‐7.4% 330 323 ‐2.1% 46.1% 22.9% 6.0% 547 787 43.8% 1,589 1,844 16.0% 42.7% ‐102 4.2% 39.9% ‐19.3% 0.0% ‐52 ‐41 ‐21.3% ‐98 26.4% 6.3% 496 746 50.6% 1,491 1,741 16.8% 42.8% ‐29.7% 10.1% ‐49 ‐39 nm ‐206 ‐215 4.3% 18.3% ‐3.5% 26.8% 214 187 ‐12.9% 371 404 8.8% 46.2% 1.9% 72.1% 5 3 ‐37.7% 13 15 17.5% 21.1% 22.3% 9.9% 656 890 35.7% 1,644 1,916 16.5% 46.5% nm nm 0 0 nm 0 0 nm nm 22.3% 9.9% 656 890 35.7% 1,644 1,916 16.5% 46.5% 22.3%
9.9%
0.52
0.71
12.7% 7.0% 8.4%
15.5% 9.4% 10.6%
35.7%
1.31
1.53
15.0% 9.5% 9.8%
15.4% 10.1% 10.5%
16.5%
46.5%
Source: SET and KTZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 4
Figure 2: 2017‐18E earnings revision Previous Current % Change Bt m 2017E 2018E 2017E 2018E 2017E 2018E Revenues 18,296 18,914 18,296 18,914 0.0% 0.0% Gross margin 14.0% 14.3% 15.4% 15.0% 10.0% 5.3% Equity income 404 444 404 444 0.0% 0.0% Norm profit 1,685 1,813 1,916 1,940 13.7% 7.0% EPS (Bt) 1.34 1.45 1.53 1.55 13.7% 7.0% Source: KTZ Research
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Note:
KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, POMPUI, TFD, TTL, NMG, NUSA.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy DISCLAIMER
This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
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KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
