GUNKUL Expects a 2020 Earnings to Top ฿3Bn, Analyst Recomm. “BUY” at ฿3.25

“GUNKUL” targeted the 2021 sales revenue to grow 15-20% YoY, following the growth of 30% in 2020, and also planned to increase its production capacity to 1,000MW within 2023 with an investment budget of 20 billion baht, meanwhile expected a backlog from EPC works this year to exceed 10 billion baht. The analyst forecasted a 1,500 million baht of net profit in 4Q20, an increase of 186%, which could push GUNKUL’s 2020 earnings to 3,219.58 million baht, thus, recommended “BUY” at a target price of ฿3.25/share.

 

Miss Sopacha Dhumrongpiyawut, Chief Executive Officer of Gunkul Engineering Public Company Limited (GUNKUL), said that the company expected a 30% growth YoY in 2020 sales revenue, beating the growth projection of 15-20%, as all business units including energy, engineering procurement and construction (EPC) and manufacture, supply and distribution of equipment for electrical system had improved operating results. 

 

Moreover, for the year 2020, GUNKUL has recorded a profit from the disposal of investments, the 75MW-Iwakuni solar power plant project in Japan, worth approximately 1,090 million baht.

 

For an investment plan, GUNKUL is still advancing in investment expansion. As of recently, the company has acquired 100% of INT Energy Pte. Ltd.’s ordinary shares (INT), a company incorporated in Singapore in order to invest in a solar power plant project with a total capacity of 50MW in Vietnam, with the investment value of 1,470 million baht. The acquisition of INT’s ordinary shares for the purpose of investing in a solar power plant in Vietnam, will help expand GUNKUL’s base of operations in Southeast Asia.

 

Miss Sopacha also stated that the company targeted the 2021 total income to grow by 15-20% compared to the same period last year, which is expected to be driven by the company’s key businesses, and projected a trading business to generate more revenue, up to 1,800 million baht. Meanwhile, forecasted an EPC sector to grow 30% YoY.  

 

KTBST Securities reiterated a “BUY” rating on GUNKUL but lowered its SOTP-based target price to ฿3.25/share from ฿3.60/share, as the analyst rolled forward its valuation to 2021E base while raising concern over the EPC business. 

 

KTBST forecasted core profit to decline -20% YoY but to jump +91% QoQ to 407 million baht, but net profit is estimated to jump + 186% YoY, + 51% QoQ to 1.5 billion baht on a one-time gain of 1.1 billion baht from the disposal of the 75-MW Iwakuni solar power project, thus revised down the 2020E core profit forecast by 52% to 1.3 billion baht, which indicates a reduction of -39%, as KTBST cut its estimation on revenue from 1) power production by 23% and 2) EPC business by 42%. 

 

Also, KTBST downgraded its 2021E core profit forecast by 12% to 2.2 billion baht, which represents a significant growth of 84%, as KTBST revised down its EPC revenue estimate by 30%. GUNKUL’s share price outperformed the SET Index by 4% in the one-month timeframe. 

 

The analysts from KTBST expected the stock to continue to be an outperformer in the near to medium terms, as 1) the company is expected to strike a deal on a 200-MW power plant, which would add 0.60 baht to KTBST target price, and 2) the stock’s valuation remains attractive, trading at 10.0x PER vs. the sector’s average level of 25.0x, and 0.4x PEG. KTBST estimated profit to grow at 23% CAGR in 2020-22E.