FSS Rates Thai Stock “Overweight” over Potential Successful Vaccine Rollout in Late 2021

FSS Rates Thai Stock “Overweight” over Potential Successful Vaccine Rollout in Late 2021

Finansia Syrus Securities (FSS) forecasted the recent SET correction to indicate higher upsides, and the downsides in domestic and tourism will be offset by export growth upsides, stated Songklod Wongchai, FSS’ analyst.


FSS believed the downside risk on SET index was now limited following a 4.2% drop on profit taking after reaching its peak in mid-Jan, reflecting a regional outflow caused by the US short-squeeze and overall portfolio unwinding, along with the large-cap sell-off on the SET.


The coronavirus vaccine rollout will attract foreign investors to re-engage with SET as it will be a good sign for Thai export recovery, which would offset the sluggish domestic and tourism sectors. Thus, FSS believed there is a limited downside risk for Thai GDP growth, and estimated that 1Q21 earnings results will be stronger for both YoY and QoQ for the first time in the 12 months.

In case the SET index dropped further in line with Bloomberg consensus to reflect the potential weak 1Q20 economy, FSS saw it as a good opportunity to accumulate over a strong earnings growth momentum projection in 2H21.


Nevertheless, FSS expected the corporate net profit growth to beat Bloomberg consensus and will stir up the stock market recovery, forecasting SET’s earnings growth to return to positive territory in 1Q21. 

Bloomberg targeted a 2021 EPS to increase to 81.90 baht from 65.00 baht last year, but lower than FSS’s projection of 85.20 baht.


FSS thought that the readiness of Covid-19 vaccine will bring recovery to developed countries and will normalize their economies this year, which will benefit Thailand’s exports in 2021 significantly. FSS stated that it is still bullish on Thai corporate earnings outlook due to the resilience and strong fundamentals of Thai companies.


Auto, retail finance, EV-related and tech-related stocks are expected to take advantage in 1H21 over a strong export growth and a higher consumer loan demand. Meanwhile, FSS saw EV-related stocks to enter an upcycle from new S-curve industries.


FSS reiterated Overweight on Thai market with a target of SET index at 1,550 points, based on 18.2x 2021E P/E, or close to 0.5SD above its 10-year average, led by 1) potentially higher than BBG consensus estimate corporate earnings; 2) positive economic data; and 3) a potential windfall from the successful implementation of a Covid vaccine. 


However, there still are downside risks, as the economic drag from the pandemic could be deeper and more prolonged than expected, but from mid-2021, FFS though the risks will be balanced.