The share price of Exotic Food Public Company Limited (XO) rose ฿0.50/share or 2.92% to ฿17.60/share as of 15:02 local time in Thailand, with a trading value of 115 million baht.
KTBST Securities (KTBST) maintained a “BUY” rating on XO but cut the target price to 24.00 baht from 26.00 baht while keeping 2021E PER at 23x (its 5-yr average).
KTBST forecast 3Q21E net profit to decline -6% YoY, -41% QoQ to 91.0 million baht. A significant decrease in QoQ would be due to 1) a -2% YoY, -26% QoQ reduction in revenue from sales, and 2) a weaker gross profit margin of 43.5% compared to 46.5% in 2Q21 and 42.1% in 3Q20. Such decline was due primarily to the uncertainty of sauce bottle deliveries, hampering the company from confirming shipping details, unlike a smooth operation in 1H21.
KTBST downgraded 2021E/2022E net profit forecast by 7%/10% to 449 million baht (+41% YoY)/491 million baht (+9%) as it revised the sauce segment’s revenue growth down to +19%/+15% YoY from +30%/+20% YoY earlier to reflect a reduction in orders backlog. The uncertainty about the shipping period has prompted several customers to cancel their orders for 4Q21E, while the company expected such a problem to be solved in November.
XO’s share is expected to become an outperformer in the near term as 1) KTBST expected the company to tackle such the late delivery of sauce bottles in November, 2) there is upside from an increase in sauce production capacity by 7,000 tons per year and an increase in listing fee budget to Bt20.0-25.0mn, and 3) the stock’s valuation looks attractive, trading at 16x 2021E PER (-1 SD below its 5-yr average).
KTBST believes the stock deserves to trade at a premium to its historical average as 1) net profit margin is projected to increase to 29% in 2022E, well above an average of 23% recorded in the past, and 2) ROE would increase to 33% from its 7-yr average of 22%.