KTBST Raises TVO’s TP to Bt44 on Growing 4Q20 Earnings over Higher Soybean Prices

KTBST Raises TVO’s TP to Bt44 on Growing 4Q20 Earnings over Higher Soybean Prices.

KTB Securities (Thailand) (KTBST) has given a “BUY” recommendation on Thai Vegetable Oil Public Company Limited (TVO) with an upgraded target price from ฿35.25/share to ฿44.00/share on the expectation of growing 4Q20 earnings from higher soybean prices.


KTBST reiterated a BUY rating on TVO but raised its target price to Bt44.00 from Bt37.00 and 2021E PER multiples to 17.8x (+1 SD above its 5-yr average) from 14.0x (5-yr mean). 4Q20E net profit was forecasted to grow +17% YoY, +31% QoQ to Bt464mn after soybean meal price rose +17% YoY, +22% QoQ to USD1,137.2 cent/bushel and soybean meal price up +30% YoY, +29% QoQ to USD386.8/short ton in the period.

The security company slightly cut its 2020E/2021E net profit forecast by 5% each to Bt1.65bn (+17%)/Bt2.02bn (+22%). Such strong growth in 2021E would be driven by 1) rising soybean/soybean meal prices, which KTBST forecasted to increase +46%/43% from the average levels in 2020 due to a tighter supply from La Nina effect in South America, 2) a stronger demand from China given an easing of the US-China trade dispute, and 3) and increase in edible soybean oil price.


In addition, TVOs share price outperformed the SET Index by 13% in the one-month timeframe following a higher soybean price. KTBST forecasted the soybean price to remain at a high level, which should bode well for TVOs 2020-21E earnings growth (+17-22%). TVO thus should trade at +1 SD above its 5-yr average, which is a similar level seen in 2016-2017, a period the company benefited from the La Nina effect.