2Q24 core profit was Bt636mn, turning around from year-long core losses, 9-20% above estimates on a wider gross margin than expected. We expect further growth in 3Q24F core earnings, up seasonally QoQ and YoY from a wider margin off a one-year high for local livestock prices amid low actual blended feed costs in 3Q24TD. We maintain Outperform with a mid-2025 TP of Bt28, based on 2x PBV (LT ROE at 15%, cost of equity of 8.7% and LT growth of 2.5%). 2Q24 net profit was Bt628mn, turning around from net loss of Bt351mn in 2Q23 and Bt124mn in 1Q24, 9% above INVX estimates and 20% above market estimates on a wider gross margin than anticipated. Excluding Bt8mn extra loss gives a core profit of Bt636mn, up from core losses of Bt168mn in 2Q23 and Bt126mn in 1Q24. Backing the rise was better sales and margin from higher livestock prices amid low feed costs.
2Q24 highlights. Sales grew 3% YoY, with higher sales volume from capacity expansion (+6% YoY) outpacing lower product prices (-3% YoY). By segment, sales grew in the food & protein unit (64% to sales; +4% YoY) from higher sales volume and broiler prices, in the agro unit (29% to sales; +1% YoY) from better sales volume and in the international unit (6% to sales; +1% YoY) from higher livestock prices in Cambodia and Laos, but fell in the pet unit (2% to sales; -5% YoY) on lower prices as more competition offset higher sales volume. Gross margin widened 360bps YoY to 14.1%, supported by all units from better livestock product prices amid low feed costs and more high-margin sales.
Outlook. 2024F targets. BTG keeps its 2024F targets for sales growth at 5-10% (vs flat YoY in 1H24), gross margin at 13-15% (vs 12.5% in 1H24) and SG&A/sales at 10-11% (vs 10.5% in 1H24), expecting 2H24F to be better than 1H24. Livestock prices. In 3Q24TD, local swine price has risen to Bt70-72/kg (+4% YoY, +2% QoQ, vs breakeven at the gross profit level for big players at Bt60-64/kg) and local broiler price is Bt44/kg (+9% YoY, flat QoQ, vs breakeven at Bt37-40/kg). The Pig Board of Thailand asked local pig players to control swine supply via cutting piglet production (which started in March); it is now asking producers to also curtail production of breeding sows. With this, and with better management of smuggled swine meat, BTG expects local swine price to improve gradually in 2H24 and into 2025. Meanwhile, strong export demand from Japan, Europe and Asia will support local broiler price in 2H24. Feed costs. In 3Q24TD, local corn spot price has risen to Bt12.6/kg, +8% YoY and +15% QoQ, on lower supply after the end of the corn harvest and the ban on importing corn because of field burning in neighboring countries. With the local harvest starting in Sep, BTG expects corn prices to edge down. Spot imported soybean meal price has fallen to Bt21/kg, -2% YoY and QoQ, and price is set to stay low. BTG’s normal inventory level is 3-4 months, and it expects actual 3Q24 blended feed costs to drop QoQ and YoY.
Key risks are lower demand and prices from fragile economies and more supply, and higher feed costs. Key ESG risks are energy, waste & water management, sustainable products (E), health & safety policies on customers/laborers (S).
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