TU – 3Q26F: Leading sector earnings growth

We expect its 3Q26 core profit at Bt1.4bn, up 16% YoY and 2% QoQ, marking the strongest earnings growth in the sector, supported by sales growth and gross margin expansion. The recent rise in skipjack tuna prices has yet to affect earnings and is expected to be temporary, with prices likely to edge down in 4Q26; meanwhile, orders remain normal and the weaker baht continues to support sales. For 4Q26F, we expect earnings to continue growing YoY, but soften QoQ due to seasonality. US tariff developments and the EU-Thailand FTA remain key factors to monitor. Maintain Outperform with a mid-2027 TP of Bt16, based on 14.5x PE (10-year average).

3Q26F net profit to be Bt1.3bn, flat YoY but +2% QoQ. Excluding an estimated Bt100mn FX loss, we forecast 3Q26 core profit at Bt1.4bn, +16% YoY and +2% QoQ. The YoY growth is driven by higher sales and gross margin, which more than offset higher SG&A expenses, while the QoQ improvement is mainly supported by seasonal factors.

3Q26F highlights. Sales are expected to increase 4% YoY, supported by stronger ambient and pet food sales, along with a 1% YoY positive FX impact. Ambient sales are projected to grow in the low- to mid-single-digit range YoY, driven by higher branded sales volume in the US and France, together with normalized OEM sales volume. Pet food sales are expected to rise 15% YoY, supported by strong demand in the US. This should more than offset a low-single-digit YoY decline in frozen sales, reflecting softer US demand, particularly for shrimp, as well as weaker feed sales. Gross margin is projected at 20.2%, +130bps YoY. Margin improvement in the ambient business, supported by a richer mix of higher-margin products and low-cost tuna inventory, is expected to offset weaker margins in the pet food unit, due to higher tuna and packaging costs, and in the frozen business, due to lower sales volume. Meanwhile, margin will down QoQ with the absence of US tariff refund as it recorded in 2Q26. SG&A/sales is expected to increase to 14.5% (+60bps YoY), as SG&A expenses are projected to rise 10% YoY, outpacing 4% YoY sales growth. The increase is primarily attributable to higher freight costs linked to elevated oil prices, together with higher marketing expenses and advisory fees related to pet food M&A activities.

Outlook. 2026 targets unchanged. TU maintains its 2026 sales growth target of 4-6% YoY (vs 4.5% YoY in 9M26F), gross margin target of 19.5-20.5% (vs 19.9% in 9M26F), and SG&A/sales guidance of 13.5-14.5% (vs 14.7% in 9M26F). Orders from key markets, particularly the US and Europe, remain normal, while the weaker baht continues to support reported sales through FX translation. Tuna price. Skipjack tuna prices rose 8% MoM to a 2026 high of US$2,275/ton in Sep, driven by: 1) higher oil prices; 2) seasonally lower catches following the Jul-Aug FAD closure in the Western Pacific Ocean; and 3) stronger demand from Ecuador amid the Eastern Pacific purse-seine fishing closure periods in Aug-Oct and Nov-Jan. The increase has yet to affect TU’s earnings given around five months of tuna inventory coverage, while OEM and branded selling prices are typically adjusted with 2-3 month and 3-12 month lags, respectively. If prices remain at current levels, TU estimates around a 50bps drop in gross margin as low-cost inventory is depleted. With skipjack tuna prices averaging US$1,846/ton in 9M26 (+17% YoY), TU raised its 2026 assumption to US$1,900/ton from US$1,700-1,800/ton. However, TU expects prices to ease to US$1,900-2,100/ton in 4Q26 following the end of the FAD closure, with prices already showing signs of easing from late Sep into early Oct, and decline YoY in 2027, potentially supported by lower oil prices if geopolitical tensions ease and improved Western Pacific catches under El Niño conditions.

Key risks: Inflationary pressure and strong THB. Key ESG risks are GHG emissions, waste management (E), customer welfare, product quality management, safety policies (S).