Thai Union Group Public Company Limited (SET: TU) is the 10th top oversold stock in the SET100 Index last Friday, though with 63% indication due to the weakness in the Thai stock market last week.
The share price of Thai Union is still seeing a loss by 13% this year and 24% behind its 52-week high of THB19.10 in October last year. The share price is trading at THB14.50 per share, which is still higher than its 52-week low of THB12.40 per share.
The share price has been underperforming so far this year as high tuna price pressures the company’s margin, while also suffering loss from its Red Lobster business.
On the bright side, the price of monthly frozen (whole) skipjack tuna raw material showed signs of declining after hitting nearly six-year high at $2,000 per ton in June, it has been trending downward to $1,900 in July, $1,800 in August and $1,700 in September.
KGI Securities (KGI) expected TU to report a 3Q23F net profit of Bt1.39bn (-45% YoY, +35% QoQ). The drop YoY would be due to lower sales from its pet care business. However, the situation is expected to improve in 3Q23F. GPM is expected to be supported by a lower tuna price and increased selling price.
KGI expected the positive earnings momentum to continue in 4Q23F as sales of ambient business began to pick up. Meanwhile, Red Lobster’s improving performance and new capacity from the ready-to-eat factory should be supportive factors in 2024F.
KGI maintained a rating of Outperform on TU with a 2024 target price of Bt19.40. TU is one of KGI’s top picks in the food and beverage sector thanks to its positive earnings momentum, undemanding valuation, and attractive dividend yields.
Last month, FSS International Investment Advisory (FSSIA) published its analysis, expecting a 3Q23 net profit of THB1.3b (+26.8% QoQ, -48.5% YoY) from Thai Union, while core profit is expected to slightly increase by 2% QoQ. The main reason is that Red Lobster’s contribution should turn to a huge loss of around THB250 million, down from a loss of THB94 million in 2Q23. However, FSSIA maintained its positive view that TU’s earnings have passed the bottom in 1Q23, in line with its subsidiary ITC.
FSSIA reiterated its BUY recommendation with its 2024 TP of THB18.00, based on an SoTP valuation. The current share price is trading at only 13.1x 2024E P/E and has an upside of 26%.
According to SETTRADE, the last seven analyses on Thai Union had been positive with all recommended ‘BUY’ with an average target price of THB16.78 per share.
