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Thailand Daily Monday , 18 January 2021 PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. KEY INDICES Symbol Close Chg %Chg KEY HIGHLIGHTS SET 1,519.13 (16.85) (1.10) Update SET50 957.86 (13.49) (1.39) Value (Btm) - SET 88,577 Charoen Pokphand Foods (CPF TB/HOLD/Bt28.50/Target: Bt28.75) Page 2 Top 5 Sector Less exciting earnings in 2021. BANK 360.39 (3.90) (1.07) PETRO Thai Vegetable Oil (TVO TB/BUY/Bt35.25/Target: Bt44.00) Page 5 1,049.17 (11.24) (1.06) PROP 212.69 (2.22) (1.03) Expect strong earnings in 2021. ENERG 24,145.34 (391.38) (1.60) True Corporation (TRUE TB/BUY/Bt3.48/Target: Bt4.00) Page 8 ICT 139.71 (0.35) (0.25) Source: Bloomberg 4Q20 results preview: Expect lower qoq core operating loss. TOP VOLUME Chg Volume Symbol Price (Bt) (%) (‘000) PTT 43.25 (1.70) 124,773.6 EA 62.25 (4.23) 54,259.8 GPSC 81.50 (2.98) 37,668.9 TASCO 20.40 (3.32) 131,719.2 CPALL 59.50 0.00 44,633.7 TOP GAINERS Chg Volume Symbol Price (Bt) (%) (‘000) AQ 0.03 50.00 98,310.1 IRCP 1.23 29.47 32,414.6 BTNC 15.80 24.41 0.4 T 0.07 16.67 50,478.1 CSS 2.16 13.09 91,162.2 TOP LOSERS Chg Volume Symbol Price (Bt) (%) (‘000) MPG 0.44 (15.38) 12,946.4 ZMICO 1.02 (12.07) 8,104.9 NEW 49.25 (12.05) 8.2 JUTHA 1.46 (12.05) 368.5 TFI 0.15 (11.76) 47,609.0 KEY STATISTICS -------------%Chg-------------- Commodity Current Price 1m 3M YTD Brent crude* 54.9 5.0 25.1 6.0 Dubai crude* 54.6 9.6 34.7 8.7 Baltic Dry Index 1,754.0 32.4 18.8 28.4 Gold Spot*** 1,820.9 (3.2) (4.1) (4.1) *(US$/bbl), *** (US$/toz) FOREIGN PORTFOLIO INVESTMENT IN EQUITIES (THAILAND) Day MTD Net YTD Net YTD Net (Mil US$) (Mil US$) (Mil US$) YoY% (19.2) 197.4 197.4 (6,180.5) Source: Bloomberg Foreign Exchange Rate - THB/US$ (onshore) = 30.08 Interest Rate (%) - TH 1-day RP = 1.50 Thai Lending Rate (%)* - MLR = 5.25 Refer to last page for important disclosures. 1 Thailand Daily Monday , 18 January 2021 COMPANY UPDATE HOLD Charoen Pokphand Foods (CPF TB) (Maintained) Less Exciting Earnings In 2021 Share Price Bt28.50 We think CPF’s 4Q20 earnings would drop qoq due to seasonality, but increase yoy on Target Price Bt28.75 one-off gains from the acquisition of a swine business in China. For 2021, we think Upside +0.9% rising feed cost would pressure its gross margin. We project 2021 net profit to decline (Previous TP Bt29.50) 17% yoy. However, stripping out one-off gains in 2020, core earnings would decrease 4% yoy in 2021. Maintain HOLD with a lower target price of Bt28.75. Entry price: COMPANY DESCRIPTION Bt24.25. CPF, which is Thailand's leading conglomerate, engages in the agro-industrial WHAT’S NEW processing of feed, farm and food. Domestic meat prices declined qoq while feed cost increased qoq in 4Q20. In 4Q20, STOCK DATA domestic swine price was Bt76.00/kg, down from Bt80.00 in 3Q20. Domestic chicken price GICS sector Consumer Staples was Bt32.00/kg, down from Bt33.67 in 3Q20. However, soybean meal price was Bt16.87/kg, Bloomberg ticker: CPF TB up 20% qoq. Domestic corn price was Bt9.08/kg, down 2% qoq. The decline in meat prices Shares issued (m): 8,413.6 was due to seasonality while soybean meal prices rose due to strong soybean demand from China and impact from La Nina in South America. Market cap (Btm): 239,786.7 Market cap (US$m): 7,996.4 4Q20 earnings to drop qoq but increase yoy. We project 4Q20 net profit at Bt5,319m, 3-mth avg daily t'over (US$m): 47.0 down 29% qoq on low meat prices, but would surge 33% yoy on one-off gains from the acquisition of a swine business in China for US$84m. 4Q20 sales would have tumbled 16% Price Performance (%) yoy and 25% qoq after CPF cut its stake in Chia Tai Investment from 49.7% to 17.4%. Gross 52-week high/low Bt34.50/Bt20.30 margin is expected at 15.9%, flat yoy but down from 19.1% in 3Q20 due to seasonality. 1mth 3mth 6mth 1yr YTD 1.8 7.5 (14.9) (2.6) 6.5 STOCK IMPACT Major Shareholders % 2021 earnings would be less exciting. Management sees domestic swine prices would Charoen Pokphand Group Co., Ltd. 25.1 remain firm in 2021 due to tight supply, especially as there is still no vaccine for the African Charoen Pokphand Holding Co., Ltd. 11.8 Swine Fever outbreak in China and Vietnam. In addition, chicken prices would improve yoy Charoen Pokphand Food Plc. 6.3 in 2021 due to the expected economic recovery on an easing in the COVID-19 pandemic. Besides, the company would try to improve its livestock breeding efficiency to tackle with FY21 NAV/Share (Bt) 22.31 rising feed costs. We forecast 2021 net profit to decline 17% yoy, mainly due to a high base FY21 Net Debt/Share (Bt) 40.44 on one-off gains in 2020. Stripping out the one-off gains, 2021 core profit could drop 4% yoy as gross margin would be impacted by rising feed cost. PRICE CHART CHAROEN POKPHAND FOODS PUB (lcy) (%) CHAROEN POKPHAND FOODS PUB/SET INDEX 45 150 140 40 130 120 35 110 30 100 90 25 KEY FINANCIALS 80 70 Year to 31 Dec (Btm) 2018 2019 2020F 2021F 2022F 20 60 Net turnover 541,937 532,573 557,414 505,782 520,162 15 50 150 EBITDA 28,867 37,002 61,090 51,224 52,895 Volum e (m ) 100 Operating profit 13,660 21,485 45,016 34,203 34,927 50 Net profit (rep./act.) 15,531 18,456 24,932 20,699 22,010 0 Net profit (adj.) 15,531 18,456 24,932 20,699 22,010 Jan 20 Mar 20 May 20 Jul 20 Sep 20 Nov 20 EPS (Bt) 1.8 2.1 2.9 2.4 2.6 PE (x) 15.8 13.3 9.8 11.9 11.2 Source: Bloomberg P/B (x) 1.6 1.6 1.4 1.3 1.2 ANALYST(S) EV/EBITDA (x) 22.4 17.5 10.6 12.7 12.3 Dividend yield (%) 2.3 2.7 3.7 3.0 3.2 Thunya Sutavepramochanon Net margin (%) 2.9 3.5 4.5 4.1 4.2 +662 659 8031 Net debt/(cash) to equity (%) 181.4 180.4 171.1 168.1 157.8 [email protected] Interest cover (x) 2.5 2.7 3.7 3.1 3.1 ROE (%) 9.3 11.1 13.8 10.3 10.3 Consensus net profit - - 22,293 20,303 19,892 UOBKH/Consensus (x) - - 1.12 1.02 1.11 Source: CPF, Bloomberg, UOB Kay Hian Refer to last page for important disclosures. 2 Thailand Daily Monday , 18 January 2021 EARNINGS REVISION/RISK 4Q20 EARNINGS PREVIEW We trim our 2020-21 net profit projections by 3% and 2% respectively as soybean meal (Btm) 4Q19 3Q20 4Q20F % YoY % QoQ prices are rising more than what we had earlier expected. Sales 140,794 157,805 117,669 -16 -25 Gross profit 22,083 30,141 18,688 -15 -38 EARNINGS REVISION SG&A 15,302 15,695 11,943 -22 -24 CPF 2018 2019 -------- 2020F ------- -------- 2021F ------- EBIT 12,413 17,729 13,463 8 -24 old new old new Net Profit 4,010 7,474 5,319 33 -29 Net profit (Btm) 15,531 18,456 25,654 24,932 21,112 20,699 Core Profit 2,376 6,497 2,086 -12 -68 %changed 0% -3% -3% -2% EPS (Bt) 0.47 0.87 0.62 33 -29 %YoY 2% 19% 39% 35% -18% -17% Source: UOB Kay Hian Core profit (Btm) 1,530 10,169 20,093 18,627 18,230 17,818 CPF: FORWARD PE BAND %changed -2% -7% -3% -2% %YoY NM 564% 98% 83% -9% -4% Gross margin (%) 12.12% 14.33% 18.09% 17.98% 16.38% 16.28% Sales growth(%) 8.06% -1.73% 4.66% 4.66% -9.26% -9.26% domestic chicken price (Bt/kg) 32.63 35.25 33.92 33.29 36.56 36.56 domestic swine price (Bt/kg) 58.68 68.41 75.33 74.58 79.48 80.55 Source: UOB Kay Hian VALUATION/RECOMMENDATION Maintain HOLD with a lower target price of Bt28.75, pegged at 12x 2021F PE, or -0.5SD to its 5-year mean. Entry price is Bt24.25. We think 2021 earnings would be less exciting yoy but dividend yield would still be appealing at 3.0%. Source: UOB Kay Hian SHARE PRICE CATALYST SOYBEAN MEAL PRICES Economic recovery and a rising population would lead to higher food demand. Source: CPF Refer to last page for important disclosures. 3 Thailand Daily Monday , 18 January 2021 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Btm) 2019 2020F 2021F 2022F Year to 31 Dec (Btm) 2019 2020F 2021F 2022F Net turnover 532,573 557,414 505,782 520,162 Fixed assets 197,430 229,632 243,157 256,681 EBITDA 37,002 61,090 51,224 52,895 Other LT assets 257,979 301,684 300,626 299,738 Deprec.