i-Tail Corporation Public Company Limited (SET: ITC) revealed that the company performance in 4Q24 would grow further compared to the previous quarter and the same period from the earlier year due to its peak season for sales as well as increasing orders around the world.
Meanwhile, ITC is assured that the overall performance of 2024 will push growth around 15-17% from its previous year. It is aiming for the highest gross profit margin at 26-28% following its expansion in the Americas, Europe, and Asia markets per growing pet food markets.
As for ITC’s plan for 2025, initially, the executives would like to push a total income by at least 15% following its expansion and improvement in strategy and governance efficiency. The details for operating plans and an investment budget to facilitate growth in both earnings and annual profit would be announced around February 2025 or after the 2024 financial report announcement, with the date for the Board of Directors meeting to approve and announce the report scheduled to be on 13 February 2025.
For ITC’s prospect in 1Q25, the company has already received around 45-50% of its quarterly target, because the market in Europe, the United States, and other markets have recovered as expected.
Trinity Securities’ analyst suggested a “Speculative Buy” on ITC at a target price of THB 25.40 per share in 2025, the securities company has been estimated based on 2025 earnings per share of THB 1.33 and P/E at 20 times. The securities assessed ITC’s 4Q24 profit at THB 975 million, maintaining the same level as the same period a year ago, but growing 27.1% from its previous quarter.
The growing profit comes from the forecasted earnings of THB 4,890 million, a 10% increase from the previous quarter and a 2.8% gain from the same period last year. Although around 10% of the order could not be fulfilled due to a shortage in container ships, resulted in said order having to be pushed into the 1Q25 instead.
Furthermore, ITC’s 4Q24 gross profit margin is expected to be at 26.1%, lower than its previous quarter of 28.9% due to inventory stockpiling pushing gross margin by around 1.8% above the usual rate. The selling, general, and administrative expenses (SG&A) have swelled from its last quarter and the same period last year, due to expenses from improving management efficiency which would help induce long-term gross margin growth.
The product mix in 4Q24 is expected to consist of a premium product group at 55% or around the same level as its last quarter or the same period a year ago, pushing the gross margin high. The global minimum tax (GMT) (the global minimum corporate income tax is at 15%) is expected to impact ITC from 2025 onward, which would push ITC’s effective tax rate up.
However, the tax’s effect depends on how Thai Union Group PCL (SET: TU) allocates to ITC. The Board of Investment (BOI) is expected to release measures to ease the effect of an increased effective tax rate. The most recent pre-orders in 1Q25 have reached around 50% of the target, with customers from the U.S. and Europe being the frequent buyers.
As such, the profit forecast for 2024-2025 has been readjusted to 2.5% and 1.6% to THB 3,780 million and THB 3,810 million, respectively. The gross margin in 2025 is expected to be similar to 2024, while customers of the premium product group are expected to see a downside to their profit in 2025 due to the effective tax rate.
Yuanta Securities said that it saw a major risk to ITC, with the company facing a significant setback to its gross profit margin, cost from corporate restructuring, and the effect from GMT. As a result, the securities have: 1. Reduce the company gross profit margin estimate down from 26.4% to 25.4% to reflect the increasing cost of materials and labor, 2. Readjust the tax rate of 2025 from 4% to 10% to reflect the effect of GMT (since ITC operates under TU which is eligible for GMT). While ITC’s tax burden remains unclear, the analysis showed that a 1% increase in the tax rate would decrease the profit by 1%
However, Yuanta still has a positive prospect for the global pet food industry and ITC’s capability of driving long-term growth. The securities have approximated ITC’s profit to grow 8% annually in 2026-2027, even with GMT factored in, the securities still recommend “Buy” ITC, but with a reduced target price from THB 29 to THB 25 using a discounted cash flow formula at the end of 2025. The securities still expect ITC to be under pressure until the effect of GMT has been clearer.
