ASIAN Jumps 5%, Analyst Forecasts a Strong Earnings Outlook in 2Q on Baht Weakness

The share price of Asian Sea Corporation Public Company Limited (ASIAN) rose ฿0.90/share or 5.14% to ฿18.40/share in the morning session on Monday, July 12, with a trading value of 509 million baht.

KTBST Securities (KTBST) holds a BUY rating on ASIAN with a target price of 19.00 baht, which is pegged to 2021E PER of 18.5x, (+0.75 SD above its 5-yr average). KTBST predicted 2Q21E core profit to grow +4.4% YoY, +20.5% QoQ to 236 million baht. 

A growth YoY would be due primarily to a low base in 2Q20, a period the company’s exports were hit hard by the COVID-19 pandemic, and Thai baht weakness benefits. A significant increase QoQ would attribute to stronger gross profit margin, which KTBST projects to increase to 17.5% from 16.9% as a result of baht weakness, and higher revenue from the premium commodity and pet food businesses following the business low season in 1Q21.

According to a group conference call with ASIAN on July 7. First, ASIAN has anticipated  that its core earnings will accelerate in 3Q21E given production expansion in pre-fried and  pet food. Second, revenue growth target for 2021E remains unchanged at 9%, as well as gross profit margin at 14-15%, although the company has anticipated upside potential to its assumption given a faster pace than expected baht weakness and strong pre-fried and pet food businesses. Last, the company has been in study of plant-based food and overseas feed business in China. 

KTBST maintains 2021E/2022E net profit forecast at 868 million baht (+6% YoY)/933 million baht (+8%). Revenue from pre-fried and pet food businesses is predicted to grow further. Gross profit margin should remain flat at 16% given the company’s effective product mix strategy. Additionally, the company has a plan to increase production capacity for pre-fried and pet food.