Preview 4Q24F: Sector’s best growth
4Q24F core profit will be Bt980mn, turning up from a core loss of Bt676mn in 4Q23 and +8% QoQ on margin expansion from better product prices and low feed costs, plus more high-margin sales. With local livestock prices rising YTD and lower feed costs, we expect 1Q25F margin to widen further YoY and QoQ. BTG is set to post the sector’s best growth in 2025F (+38% YoY) backed by a revived swine unit in Thailand (off the low 1H24 base). We expect earnings downside from a rise in local minimum wage to be more than offset by upside from a strong THB (as a net importer) and the completion of the purchase of an egg operator in Singapore in 1Q25. We stay Outperform with a mid-2025 SOTP TP of Bt23 (10-14x PE for feed, farm, food units).
Best YoY and QoQ growth in 4Q24F core profit at Bt980mn, up from a core loss of Bt676mn in 4Q23 and +8% QoQ. Underwriting this is: 1) a wider margin from lower feed costs and better local livestock product prices - local swine price was Bt72/kg (+10% YoY, +1% QoQ), while local broiler price was Bt38/kg (+1% YoY, -11% QoQ);
2) more high-margin sales brought by capacity expansion in the swine business and distribution channel adjustment via moving swine and broiler sales into food service.
Potentially better 1Q25F earnings. In Jan to date, local swine price is up to Bt75/kg (+4% MoM, +10% YoY) and local broiler price has also risen to Bt41.5/kg (+5% MoM, +5% YoY). Normally, local livestock prices rise on better demand several weeks ahead of and during Chinese New Year (January 29 this year). This year, the second cash handout approved by Cabinet of up to Bt40bn for four million seniors on January 27 will help support local livestock prices further. On the cost side, BTG keeps a 3-4-month feed inventory; thus, it will realize lower actual feed costs in 1Q25F after a drop in 4Q24 in spot corn and imported soybean meal prices to a 3-year low of Bt10/kg (-4% YoY, -17% QoQ) and Bt19/kg (-16% YoY, -8% QoQ). Rising product prices amid low feed costs will widen margin further YoY and QoQ in 1Q25F.
Sector’s best growth in 2025F. BTG is poised to lead with the sector’s best earnings growth (+38% YoY) in 2025F from a revived local swine industry off the low 1H24 base from less smuggled pork and a supply reduction arranged by government policies, moderate improvement in the local broiler industry from balanced local and export demand and supply and continued low feed costs brought by good crop conditions. We expect the earnings downside from the rise in wages to be more than offset by upside from a strong THB and the completion of the M&A in 1Q25. The earnings downside from the rise in minimum wage is estimated at 4-5% (+2-13% wage increase starting from Jan 1, depending on province), as its labor costs account for 5-6% of total costs and its factories are located in provinces where the rise is low to medium, i.e., Lop Buri (+1.7% wage rise), Samut Sakhon and Pathum Thani (+5% wage rise). For upside, we estimate 2% earnings upside from the baht’s appreciation against the US dollar (spot rate at Bt34/US$ vs our assumption of Bt35.3/US$ in 2025F) as it is a net importer (imports of US$-denominated feed for livestock are higher than its US$-denominated broiler exports) and another 5-7% upside from the completion of the purchase of Eggriculture in Singapore in 1Q25.
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).
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