KTB Securities (Thailand) (KTBST) has given a “BUY” recommendation on Carabao Group Public Company Limited (CBG) with a target price of ฿170/share, expecting 3Q20E net profit to hit a quarterly record high
KTBST forecast 3Q20E net profit to grow +24% YoY, +3% QoQ to Bt908mn. On a YoY basis, total revenue would grow +18% YoY to Bt4.5bn as 1) domestic sales of branded own would rise +7%, 2) overseas sales would increase +12%, and 3) revenue from the distribution business for the third party is estimated to hit a record high for the ninth consecutive quarter on the back of a new product.
Additionally, gross profit margin would widen slightly to 41.6%, as capacity utilization has increased. A mere growth QoQ would be due primarily to a high base in 2Q20, a period CBG booked a non-recurring expense of Bt50mn for COVID-19 donations, amid a stronger gross profit margin. Based on KTBST forecast, 9M20E net profit will account for 73% of KTBST 2020E forecast, and thus KTBST maintains its full-year forecast at Bt3.54bn, which indicates a rise of +41%. In 2021E, KTBST estimates net profit to grow a further +26% to Bt4.46bn.
CBGs share price outperformed the SET Index by 2-20% in one and three months. KTBST believes downside risk from the current level will be limited as 1) CBGs earnings outlook remains bright with KTBST’s EPS growth estimates at 33% CAGR in 2019-21E, and 2) KTBST see upside to its earnings forecast given the stronger-than-expected feedback for Woody C+Lock in both domestic and overseas markets.