BTG - 3Q24: In line with estimates

3Q24 core profit was in line at Bt910mn, up from a core loss of Bt736mn in 3Q23 and +43% QoQ, on high livestock prices and low feed costs. We expect 4Q24F core earnings to grow YoY and be flat/up QoQ (contrast to food peers under coverage whose earnings will fall QoQ on seasonality), from a wider margin brought by high livestock prices and low feed costs, and a structural change with a shift into more high-margin export and food service sales, particularly of broilers. We stay Outperform with a new mid-2025 SOTP TP of Bt26 based on SOTP valuation (from Bt28 based on PBV), to match valuation methodology for peers.

3Q24 net profit in line at Bt979mn, up from a net loss of Bt784mn and +56% QoQ. Excluding Bt69mn FX gain and gain from changes in biological assets, 3Q24 core profit was Bt910mn, up from core loss of Bt736mn in 3Q23 and +43% QoQ, backed by better sales and margin off high livestock prices and low feed costs.

3Q24 highlights. Sales grew 11% YoY on higher sales volume from capacity expansion (+11.5% YoY). By segment, sales grew in the food & protein unit (65% of sales; +14% YoY) from higher sales volume and better livestock prices, in the agro unit (29% of sales; +5% YoY) and in the international unit (5% of sales; +6% YoY) from greater sales volume, but fell in the pet unit (2% of sales; -7% YoY) on lower prices as stiffer competition offset higher sales volume and a shift in demand to low-priced products from the fragile economy. Gross margin widened 570bps YoY to 13.9% on better livestock product prices amid low feed costs and a more favorable sales mix in the food & protein (more high-margin export and food service sales) and international (more high-margin pork & chicken meat sales, replacing livestock sales) businesses.

2024F targets and outlook. BTG keeps its 2024F targets for sales growth at 5-10% (vs +4% YoY in 9M24), gross margin at 13-15% (vs 12.9% in 9M24) and SG&A/sales at 10-11% (vs 10.3% in 9M24). It expects 4Q24F earnings to be stronger, with margin widening QoQ in the feed and livestock units led by lower feed costs. In 4Q24TD, more supply has pulled local corn and imported soybean meal prices down to Bt10/kg (-5% YoY,
-17% QoQ) and Bt19.1/kg (-13% YoY, -5% QoQ). This lowers swine and broiler breakeven costs for big players to an estimated Bt60/kg and Bt36-37/kg (from Bt62-65/kg and Bt38/kg earlier). In 4Q24TD, local swine and broiler prices are Bt71/kg (+8% YoY, -1% QoQ) and Bt38/kg (+2% YoY, -10% QoQ), down QoQ from the rainy season and floods and the vegetarian festival in October; it expects prices to improve on more demand. For the swine unit, BTG is positive on local supply developments, with less smuggled swine meat and more supply exported into Vietnam, which has been hit by a recurrence of ASF over the past few months. It has observed no significant rise in local supply. For the broiler unit, BTG expects to continue to see a wider margin from shifting its sales to high-margin export and food service sales from low-margin traditional trade and industrial channels. After growing in the double digits YTD, export sales are poised to grow further from robust demand in the UK, Europe and Japan based on advance orders into 1H25.

Key risks are lower demand and prices from fragile economies and more supply, and higher feed costs. Key ESG risks are GHG emission, waste & water management (E), customer welfare, product quality management, health & safety policies (S).