Outperform (16E TP Bt13 AWS
Thai Metal Trade Outperform (16E TP Bt13.60)
Company Update
Close Bt13.00
Steel
Earning upgrade/Earnings downgrade/Overview unchanged
September 1, 2016
3Q16E earnings growth of 53%YoY; attractive yield of 8‐10% Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.535
0.900
KT ZMICO vs. consensus Share data
15.3%
11.1%
Reuters / Bloomberg
TMT.BK/TMT TB
Paid‐up Shares (m)
435.38
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
6.00/163.00
Foreign limit / actual (%)
49.00/0.32
52 week High / Low (Bt)
13.60/8.30
Avg. daily T/O (shares 000) NVDR (%)
415.00 1.05
Estimated free float (%)
21.29
Beta
0.34
URL
www.thaimetaltrade.com
CGR
Anti‐corruption
Level 2 (Declared)
Phornsri Laysanitsaerekul Analyst, no. 17621 [email protected] 66 (0) 2624‐6258
Attractive dividend yield of 8‐10% for 2016E a major appeal We like TMT for its one‐stop integrated steel solution service center with effective management in terms of raw materials and its broad range of products that can serve the market’s demand quite well. The firm’s net profit is expected to grow strongly by 141% in 2016E, hitting a new high. Another appeal is an expected dividend yield of 8‐10%. Its 3Q16E earnings outlook seems promising YoY. We thus reaffirm “Outperform”, with a DDM‐based target price of Bt13.60/share (8x PER). Steel prices likely to move upwards in 2H16 TMT’s average selling price weakened to Bt18.7/kg in Jul‐16 and Bt18.5/kg in Aug‐16 from the peak at Bt21.2/kg in May‐16, in line with the price trend in the global market. However, we expect the price to move upwards in Sep‐16 on the back of several factors. First, steel imports have declined as the government hiked the import duty to curb the market dumping of HRC and steel pipe imports; therefore, importers have refrained from importing more steel recently. Second, steel prices in China have increased as the government has ordered some polluting steel mills to close down. Finally, the fact that three major domestic producers have been unable to run at their full capacity has caused domestic demand for HRC to increase, both from steel pipe producers (who need supply to replace imported products) and dealers (who need to take profit from higher prices). 3Q16E earnings to weaken 55%QoQ but grow 53%YoY Sales volume has gained momentum in 3Q16, with volume of 90,000 tons in the first half of the quarter (63% and 62% of the total sales volume in 3Q15 and 2Q16). Therefore, we project total sales volume of 166,000 tons in 3Q16 (+16%YoY, +14%QoQ), driven by growing demand from contractors (including those general contractors and fabricators who work on steel structures for power plants in the US). While the average selling price may fall to Bt18.72/kg (‐7%YoY, ‐9%QoQ), this may be offset by the lower raw material prices. Hence, we project a gross profit margin of 9% in 3Q16 (vs. 7% in 3Q15 and 16.7% in 2Q16). Our preliminary forecast calls for TMT’s net profit to amount to Bt126mn in 3Q16E (+53%YoY, ‐55%QoQ). 2016E profit to hit a new high We expect TMT’s 9M16 earnings to grow by 168%YoY to Bt688mn, accounting for 89% of 2016E profit, which is expected to hit a new high of Bt773mn, up 141% (assuming sales volume of 624,000 tons, up 10% vs. the firm’s target of 660,000 tons, up 15%). We also assume a gross profit margin of 11.5% vs. 7.2% in 2015E. The 2H16 profit margin is expected to normalize at 7‐10% (vs. 15.7% in 1H16). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS grw (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 13,055 440 1.01 1.01 7% 0.80 5.01 2013 12.86 3.94 2.59 6.2% 20.7% 139.6%
2014 12,251 334 0.77 0.77 ‐24% 0.65 4.98 2014 16.94 4.48 2.61 5.0% 15.4% 114.7%
2015 11,569 321 0.74 0.74 ‐4% 0.65 5.07 2015 17.66 4.69 2.56 5.0% 14.7% 79.9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 12,711 773 1.77 1.77 141% 1.15 6.19 2016E 7.33 1.37 2.10 8.9% 31.5% 76.0%
2017E 14,094 438 1.00 1.00 ‐43% 0.80 6.04 2017E 12.94 2.05 2.15 6.2% 16.4% 94.0%
Figure 1 : 3Q16 and 9M16 earnings projections Consolidated Profit and Loss FY Dec (Btm) 3Q15 2Q16 3Q16E %YoY Revenue 2,859 2,987 3,108 9% Gross profit 203 498 280 38% EBITDA 139 391 237 71% Interest Expenses (15) (12) (12) ‐22% Net other income 18 14 14 ‐23% Income tax (21) (69) (32) 51% Forex gain (loss) 0 0 0 nm Other extraordinary items 0 0 0 nm Gn(Ls) from affiliates 0 0 0 nm Net profit (loss) 82 283 126 53% 82 283 126 53% Normalized profit (loss) Reported EPS (Bt) 0.19 0.65 0.29 53% Gross margin 7.1% 16.7% 9.0% 4.8% 13.1% 7.6% EBITDA margin Net profit margin 2.9% 9.5% 4.1% Current ratio (x) 1.18 1.23 1.23 9.18 33.38 20.27 Interest coverage (x) Effective tax rate 20.2% 19.7% 20.0% Source: TMT, KT Z Research
%QoQ 9M15 4% 8,934 ‐44% 630 ‐39% 426 0% (48) 0% 52 ‐54% (65) nm 0 nm 0 nm 0 ‐55% 257 ‐55% 257 ‐55% 0.59
9M16E 9,258 1242 1014 (33) 42 (170) 0 0 0 688 688 1.58
%YoY 2015 4% 11,569 97% 833 138% 612 ‐30% (60) ‐19% 67 162% (84) nm 0 nm 0 nm 0 168% 321 168% 321 168% 0.73
2016E 12,711 1462 1213 (55) 43 (193) 0 0 0 773 773 1.76
7.0% 4.8% 2.9% 1.18 8.96 20.2%
13.4% 10.9% 7.4% 1.23 30.46 19.8%
7.2% 5.3% 2.8% 1.25 10.28 20.7%
11.5% 9.5% 6.1% 1.41 21.93 20.0%
YTD %YoY (% of 2016E) 10% 73% 75% 85% 98% 84% ‐7% 60% ‐36% 98% 131% 88% nm nm nm nm nm nm 141% 89% 141% 89% 141% 89%
2Q16
3Q16E
1Q16
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
Figure 2 : Quarterly sales volume and gross profit margin projections Gross margin Sales volume (ton) TMT's quarterly sales volume & GM 18.0% 180,000 16.7% Sales volumes (ton) Gross margin (%) 16.0% 160,000 14.7% 140,000 14.0% 13.0% 11.0% 12.0% 120,000 10.0% 100,000 9.8% 8.5% 8.6% 8.2% 8.6% 9.0% 80,000 8.1% 8.0% 7.0% 7.7% 7.6% 7.1% 6.8% 6.9% 7.0% 6.0% 6.0% 60,000 6.0% 6.7% 6.0% 5.1% 4.0% 40,000 20,000 2.0% 0.0% 0 Source: TMT, KT Z Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
(X) 50.0 40.0 30.0
+3 S.D. +2 S.D. +1 S.D.
20.0 Avg. 10.0
-1 S.D.
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Figure 4 : HRC price (CIS market) US$/ton 900 800 700 600 500 400 300 200 100 Source: Bloomberg, KT Z Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Aug-16
Nov-15
Jul-14
Mar-15
Nov-13
Mar-13
Oct-11
Jun-12
Jun-10
Feb-11
Jan-09
Sep-09
May-08
Jan-07
-10.0 Sep-07
Aug-16
Nov-15
Jul-14
Mar-15
0.0
Nov-13
Jun-12
PBV Band
Mar-13
Oct-11
Jun-10
Feb-11
Jan-09
Sep-09
May-08
Jan-07
Sep-07
Figure 3 : PER & PBV Band PER Band (X) 40 35 30 +2 S.D. 25 20 +1 S.D. 15 +0.5 S.D. Avg. 10 -0.5 S.D. 5 -1 S.D. 0 Source: KT Z Research
Financial Table PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Extra items Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt)
2013 13,055 (11,983) 1,072 (464) 728 (120) 608 (99) 0 45 553 (112) 0 0 440 1.01 1.01 440 1.01 0.80
2014 12,251 (11,382) 869 (416) 595 (142) 453 (79) 0 46 419 (85) 0 0 334 0.77 0.77 334 0.77 0.65
2015 11,569 (10,736) 833 (436) 612 (215) 397 (60) 0 67 404 (84) 0 0 321 0.74 0.74 321 0.74 0.65
2016E 12,711 (11,249) 1,462 (483) 1,213 (234) 979 (55) 0 43 966 (193) 0 0 773 1.77 1.77 773 1.77 1.15
2017E 14,094 (13,037) 1,057 (493) 814 (250) 564 (63) 0 46 547 (109) 0 0 438 1.00 1.00 438 1.00 0.80
BALANCE SHEET (Btm) Cash and equivalents Inventories Investment PP&E‐net Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity
2013 192 1,777 21 1,523 5,979 3,232 9 3,795 0 2,183 5,979
2014 262 1,282 56 1,513 5,245 2,741 9 3,076 0 2,169 5,245
2015 368 834 56 1,557 4,620 2,125 6 2,413 0 2,207 4,620
2016E 250 1,267 56 1,575 5,343 2,300 0 2,646 0 2,697 5,342
2017E 225 1,468 56 1,537 5,711 2,700 0 3,079 0 2,632 5,711
CASH FLOW (Btm) EBIT Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt)
2013 608 120 (576) (223) (71) (260) 2 (257) 686 7 (343) (36) 314 (14) ‐331 ‐0.76
2014 453 142 725 (241) 1,080 (168) (0) (168) (534) 0 (349) 40 (843) 69 912 2.09
2015 397 215 702 (104) 1,210 (192) (9) (201) (619) 0 (283) (1) (903) 106 1,018 2.34
2016E 979 234 (765) (203) 245 (252) (0) (252) 169 0 (283) 2 (112) (119) ‐7 ‐0.02
2017E 564 250 (404) (123) 287 (212) (0) (212) 400 0 (502) 3 (100) (25) 75 0.17
PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 26.6 14.6 448.4 8.2 5.6 4.7 3.4 3.4 (20.3)
2014 (6.2) (18.3) (3.1) 7.1 4.9 3.7 2.7 2.7 (20.2)
2015 (5.6) 2.8 (24.1) 7.2 5.3 3.4 2.8 2.8 (20.7)
2016E 9.9 98.2 (4.1) 11.5 9.5 7.7 6.1 6.1 (20.0)
2017E 10.9 (32.9) 141.1 7.5 5.8 4.0 3.1 3.1 (20.0)
FINANCIAL QUALITY Total interest bearing debt (Btm) Total debt to capital employed (x) Net debt (Cash) (Btm) Net debt to equity (x) Interest coverage (x)
2,598 0.48 2,392 1.16 7.32
3,240 0.66 3,048 1.40 7.50
2,750 0.63 2,487 1.15 10.28
2,131 0.43 1,763 0.80 21.93
2,300 0.43 2,050 0.76 13.02
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
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, PACE, TPOLY, M‐CHAI, EARTH, CWT. KT ZMICO is a co‐underwriter of ALT, EKH, RJH, BCPG.
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)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator 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 5 of 5
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Company Update
Close Bt13.00
Steel
Earning upgrade/Earnings downgrade/Overview unchanged
September 1, 2016
3Q16E earnings growth of 53%YoY; attractive yield of 8‐10% Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
1.535
0.900
KT ZMICO vs. consensus Share data
15.3%
11.1%
Reuters / Bloomberg
TMT.BK/TMT TB
Paid‐up Shares (m)
435.38
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
6.00/163.00
Foreign limit / actual (%)
49.00/0.32
52 week High / Low (Bt)
13.60/8.30
Avg. daily T/O (shares 000) NVDR (%)
415.00 1.05
Estimated free float (%)
21.29
Beta
0.34
URL
www.thaimetaltrade.com
CGR
Anti‐corruption
Level 2 (Declared)
Phornsri Laysanitsaerekul Analyst, no. 17621 [email protected] 66 (0) 2624‐6258
Attractive dividend yield of 8‐10% for 2016E a major appeal We like TMT for its one‐stop integrated steel solution service center with effective management in terms of raw materials and its broad range of products that can serve the market’s demand quite well. The firm’s net profit is expected to grow strongly by 141% in 2016E, hitting a new high. Another appeal is an expected dividend yield of 8‐10%. Its 3Q16E earnings outlook seems promising YoY. We thus reaffirm “Outperform”, with a DDM‐based target price of Bt13.60/share (8x PER). Steel prices likely to move upwards in 2H16 TMT’s average selling price weakened to Bt18.7/kg in Jul‐16 and Bt18.5/kg in Aug‐16 from the peak at Bt21.2/kg in May‐16, in line with the price trend in the global market. However, we expect the price to move upwards in Sep‐16 on the back of several factors. First, steel imports have declined as the government hiked the import duty to curb the market dumping of HRC and steel pipe imports; therefore, importers have refrained from importing more steel recently. Second, steel prices in China have increased as the government has ordered some polluting steel mills to close down. Finally, the fact that three major domestic producers have been unable to run at their full capacity has caused domestic demand for HRC to increase, both from steel pipe producers (who need supply to replace imported products) and dealers (who need to take profit from higher prices). 3Q16E earnings to weaken 55%QoQ but grow 53%YoY Sales volume has gained momentum in 3Q16, with volume of 90,000 tons in the first half of the quarter (63% and 62% of the total sales volume in 3Q15 and 2Q16). Therefore, we project total sales volume of 166,000 tons in 3Q16 (+16%YoY, +14%QoQ), driven by growing demand from contractors (including those general contractors and fabricators who work on steel structures for power plants in the US). While the average selling price may fall to Bt18.72/kg (‐7%YoY, ‐9%QoQ), this may be offset by the lower raw material prices. Hence, we project a gross profit margin of 9% in 3Q16 (vs. 7% in 3Q15 and 16.7% in 2Q16). Our preliminary forecast calls for TMT’s net profit to amount to Bt126mn in 3Q16E (+53%YoY, ‐55%QoQ). 2016E profit to hit a new high We expect TMT’s 9M16 earnings to grow by 168%YoY to Bt688mn, accounting for 89% of 2016E profit, which is expected to hit a new high of Bt773mn, up 141% (assuming sales volume of 624,000 tons, up 10% vs. the firm’s target of 660,000 tons, up 15%). We also assume a gross profit margin of 11.5% vs. 7.2% in 2015E. The 2H16 profit margin is expected to normalize at 7‐10% (vs. 15.7% in 1H16). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) Norm EPS (Bt) Norm EPS grw (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 13,055 440 1.01 1.01 7% 0.80 5.01 2013 12.86 3.94 2.59 6.2% 20.7% 139.6%
2014 12,251 334 0.77 0.77 ‐24% 0.65 4.98 2014 16.94 4.48 2.61 5.0% 15.4% 114.7%
2015 11,569 321 0.74 0.74 ‐4% 0.65 5.07 2015 17.66 4.69 2.56 5.0% 14.7% 79.9%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 12,711 773 1.77 1.77 141% 1.15 6.19 2016E 7.33 1.37 2.10 8.9% 31.5% 76.0%
2017E 14,094 438 1.00 1.00 ‐43% 0.80 6.04 2017E 12.94 2.05 2.15 6.2% 16.4% 94.0%
Figure 1 : 3Q16 and 9M16 earnings projections Consolidated Profit and Loss FY Dec (Btm) 3Q15 2Q16 3Q16E %YoY Revenue 2,859 2,987 3,108 9% Gross profit 203 498 280 38% EBITDA 139 391 237 71% Interest Expenses (15) (12) (12) ‐22% Net other income 18 14 14 ‐23% Income tax (21) (69) (32) 51% Forex gain (loss) 0 0 0 nm Other extraordinary items 0 0 0 nm Gn(Ls) from affiliates 0 0 0 nm Net profit (loss) 82 283 126 53% 82 283 126 53% Normalized profit (loss) Reported EPS (Bt) 0.19 0.65 0.29 53% Gross margin 7.1% 16.7% 9.0% 4.8% 13.1% 7.6% EBITDA margin Net profit margin 2.9% 9.5% 4.1% Current ratio (x) 1.18 1.23 1.23 9.18 33.38 20.27 Interest coverage (x) Effective tax rate 20.2% 19.7% 20.0% Source: TMT, KT Z Research
%QoQ 9M15 4% 8,934 ‐44% 630 ‐39% 426 0% (48) 0% 52 ‐54% (65) nm 0 nm 0 nm 0 ‐55% 257 ‐55% 257 ‐55% 0.59
9M16E 9,258 1242 1014 (33) 42 (170) 0 0 0 688 688 1.58
%YoY 2015 4% 11,569 97% 833 138% 612 ‐30% (60) ‐19% 67 162% (84) nm 0 nm 0 nm 0 168% 321 168% 321 168% 0.73
2016E 12,711 1462 1213 (55) 43 (193) 0 0 0 773 773 1.76
7.0% 4.8% 2.9% 1.18 8.96 20.2%
13.4% 10.9% 7.4% 1.23 30.46 19.8%
7.2% 5.3% 2.8% 1.25 10.28 20.7%
11.5% 9.5% 6.1% 1.41 21.93 20.0%
YTD %YoY (% of 2016E) 10% 73% 75% 85% 98% 84% ‐7% 60% ‐36% 98% 131% 88% nm nm nm nm nm nm 141% 89% 141% 89% 141% 89%
2Q16
3Q16E
1Q16
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
Figure 2 : Quarterly sales volume and gross profit margin projections Gross margin Sales volume (ton) TMT's quarterly sales volume & GM 18.0% 180,000 16.7% Sales volumes (ton) Gross margin (%) 16.0% 160,000 14.7% 140,000 14.0% 13.0% 11.0% 12.0% 120,000 10.0% 100,000 9.8% 8.5% 8.6% 8.2% 8.6% 9.0% 80,000 8.1% 8.0% 7.0% 7.7% 7.6% 7.1% 6.8% 6.9% 7.0% 6.0% 6.0% 60,000 6.0% 6.7% 6.0% 5.1% 4.0% 40,000 20,000 2.0% 0.0% 0 Source: TMT, KT Z Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
(X) 50.0 40.0 30.0
+3 S.D. +2 S.D. +1 S.D.
20.0 Avg. 10.0
-1 S.D.
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
Figure 4 : HRC price (CIS market) US$/ton 900 800 700 600 500 400 300 200 100 Source: Bloomberg, KT Z Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
Aug-16
Nov-15
Jul-14
Mar-15
Nov-13
Mar-13
Oct-11
Jun-12
Jun-10
Feb-11
Jan-09
Sep-09
May-08
Jan-07
-10.0 Sep-07
Aug-16
Nov-15
Jul-14
Mar-15
0.0
Nov-13
Jun-12
PBV Band
Mar-13
Oct-11
Jun-10
Feb-11
Jan-09
Sep-09
May-08
Jan-07
Sep-07
Figure 3 : PER & PBV Band PER Band (X) 40 35 30 +2 S.D. 25 20 +1 S.D. 15 +0.5 S.D. Avg. 10 -0.5 S.D. 5 -1 S.D. 0 Source: KT Z Research
Financial Table PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Equity earnings Other income / exp. EBT Corporate tax Minority interests Extra items Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt)
2013 13,055 (11,983) 1,072 (464) 728 (120) 608 (99) 0 45 553 (112) 0 0 440 1.01 1.01 440 1.01 0.80
2014 12,251 (11,382) 869 (416) 595 (142) 453 (79) 0 46 419 (85) 0 0 334 0.77 0.77 334 0.77 0.65
2015 11,569 (10,736) 833 (436) 612 (215) 397 (60) 0 67 404 (84) 0 0 321 0.74 0.74 321 0.74 0.65
2016E 12,711 (11,249) 1,462 (483) 1,213 (234) 979 (55) 0 43 966 (193) 0 0 773 1.77 1.77 773 1.77 1.15
2017E 14,094 (13,037) 1,057 (493) 814 (250) 564 (63) 0 46 547 (109) 0 0 438 1.00 1.00 438 1.00 0.80
BALANCE SHEET (Btm) Cash and equivalents Inventories Investment PP&E‐net Total assets ST debt & current portion Long‐term debt Total liabilities Minority interests Shareholder equity Total liab. & shareholder equity
2013 192 1,777 21 1,523 5,979 3,232 9 3,795 0 2,183 5,979
2014 262 1,282 56 1,513 5,245 2,741 9 3,076 0 2,169 5,245
2015 368 834 56 1,557 4,620 2,125 6 2,413 0 2,207 4,620
2016E 250 1,267 56 1,575 5,343 2,300 0 2,646 0 2,697 5,342
2017E 225 1,468 56 1,537 5,711 2,700 0 3,079 0 2,632 5,711
CASH FLOW (Btm) EBIT Depreciation & amortization Change in working capital FX, non‐cash adjustment & others Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt)
2013 608 120 (576) (223) (71) (260) 2 (257) 686 7 (343) (36) 314 (14) ‐331 ‐0.76
2014 453 142 725 (241) 1,080 (168) (0) (168) (534) 0 (349) 40 (843) 69 912 2.09
2015 397 215 702 (104) 1,210 (192) (9) (201) (619) 0 (283) (1) (903) 106 1,018 2.34
2016E 979 234 (765) (203) 245 (252) (0) (252) 169 0 (283) 2 (112) (119) ‐7 ‐0.02
2017E 564 250 (404) (123) 287 (212) (0) (212) 400 0 (502) 3 (100) (25) 75 0.17
PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 26.6 14.6 448.4 8.2 5.6 4.7 3.4 3.4 (20.3)
2014 (6.2) (18.3) (3.1) 7.1 4.9 3.7 2.7 2.7 (20.2)
2015 (5.6) 2.8 (24.1) 7.2 5.3 3.4 2.8 2.8 (20.7)
2016E 9.9 98.2 (4.1) 11.5 9.5 7.7 6.1 6.1 (20.0)
2017E 10.9 (32.9) 141.1 7.5 5.8 4.0 3.1 3.1 (20.0)
FINANCIAL QUALITY Total interest bearing debt (Btm) Total debt to capital employed (x) Net debt (Cash) (Btm) Net debt to equity (x) Interest coverage (x)
2,598 0.48 2,392 1.16 7.32
3,240 0.66 3,048 1.40 7.50
2,750 0.63 2,487 1.15 10.28
2,131 0.43 1,763 0.80 21.93
2,300 0.43 2,050 0.76 13.02
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
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, PACE, TPOLY, M‐CHAI, EARTH, CWT. KT ZMICO is a co‐underwriter of ALT, EKH, RJH, BCPG.
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)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator 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 5 of 5
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
