Despite the COVID-19 situation in Thailand and across the world is improving, with the spread of the Omicron variant, it is likely to spur demand for vitamins and drugs. Hence, four analysts have rated Mega Lifesciences Public Company Limited (SET: MEGA) as a “BUY” with a target price of THB55.00-63.00 per share.
MEGA’s executive team had forecast a doubling of revenue in the next three years, citing brand loyalty in Myanmar, Cambodia, and Vietnam. While waiting for medical-grade CBD and hemp oil, the company is planning to invest in a downstream hem business, as this is a key driver of a new S-curve. A concrete development in the hemp business is expected in 3Q22.
| Analysts | Recommendation | Target Price |
| KTBST Securities | BUY | THB60.00 |
| Finansia Syrus Securities | BUY | THB63.00 |
| Country Group Securities | BUY | THB56.00 |
| Maybank Securities (Thailand) | BUY | THB55.00 |
KTBST Securities (KTBST) forecast MEGA’s 4Q21E net profit to grow YoY, in expectation of stronger revenue in Mega We Care (WMC) amid flat revenue in Maxxcare, but to decline QoQ given a high base in 3Q21. The hemp business is expected to see concrete development in 3Q22E.
MEGA has a competitive edge over peers as 1) the company is the leading position in the diet supplement market in Thailand and CLMV, implying strong brand awareness; 2) the company which has its own plant enables production flexibility; and 3) the company has a potential to export its hemp products.
KTBST maintains 2021E net profit forecast at a record high of THB1.96 billion, which indicates a robust +41% growth YoY, and 2022E forecast at THB2.03 billion, up +3%. There is scope to upgrade 2022E earnings forecast as demand for vitamins and drugs will surge if the omicron spread escalates.
Additionally, KTBST expects sales of supplement products and drugs to grow. First, the omicron spread across the globe is likely to spur demand for vitamins and drugs, particularly Nat C, B and D that are WMC’s best selling products. Second, the company has multiple products that have lined up for registrations. Last, health-conscious consumers are expected to continue to consume their vitamin routines.
Meanwhile, Maybank Securities (Thailand) (MST) estimates MEGA’s 4Q21E core profit grew 6% YoY and declined 11% QoQ to THB477 million. Usually, 4Q is the peak quarter but the decline QoQ in 4Q21E could have been caused by: 1) COVID abated (infections peaked in 3Q21 for Thailand, a key market); and the 2) the political challenges in Myanmar (a key market for distribution) that led to flat sales in the distribution business. MST estimates sales of the branded business grew 4% YoY and declined 14.7% QoQ in 4Q21E to THB1.74 billion and distribution sales were flat YoY and declined 5.7% QoQ to THB1.76 billion. MTS believes that the softer 4Q could continue into 2022. Thus, revising down the core profit forecasts by 5.7% and 5.3% for FY21E and FY22E, respectively.
