On Tuesday at 10:47 AM (Bangkok time), the share price of Sappe Public Company Limited (SET: SAPPE) rose by 2.48% or THB 1.25 to THB 51.75, with a trading value of THB 15.49 million.
DAOL Securities maintained a ‘BUY’ rating for SAPPE but adjusted its target price to THB 63.00 per share from the previous target of THB 96.00 per share. This modification is based on the 2025 price-to-earnings ratio (PER) of 14.0x, compared to 2024’s 22.0x. Despite the reduction in target price, it still represents a 21% upside from the current trading price of THB 52.00 per share.
The decision to lower the PER is influenced by the sluggish recovery in purchasing power. The estimated net profit for 4Q24 is projected at THB 235 million, showcasing a 40% year-on-year increase but a 22% quarter-on-quarter decline, primarily due to lower-than-expected revenue.
The year-over-year profit growth was driven by a 15% increase in total revenue stemming from growth in the Middle East and the domestic market, with growth in Asia and the USA offsetting the decline in Europe. Gross profit margin (GPM) for the period remained unchanged year-over-year, while there was a seasonal decline in profit quarter-over-quarter.
In response to the slower-than-anticipated economic recovery and purchasing power, the analyst adjusted SAPPE’s net profit forecasts for 2024 and 2025 downward by 4% and 12%, respectively.
The analyst predicted a net profit of THB 1,298 million for 2024, reflecting a 21% year-over-year increase, and a net profit of THB 1,390 million in 2025, signaling a 7% year-over-year rise.
The estimations did not incorporate the tax benefits from the Board of Investment (BOI) amounting to THB 275 million. This tax privilege is attributed to products manufactured from a new production line that commenced commercial operations in 2024, valid for a five-year period, and a new factory that was granted BOI privileges and is set to start commercially operating in 1Q25.
As SAPPE’s share price estimates, which lagged behind the SET by -10% over the previous month, has reflected the sluggish rebound of 4Q24 profits, the analyst views the valuation as appealing, with the 2025 price-to-earnings ratio (PER) of 11.2x.
