Consensus Rates “BUY” on TU, Expecting Earnings Rebound in 2Q as Countries Are Reopening

Analysts recommended “BUY” on Thai Union Group Public Company Limited (TU) in anticipation of a bright 2Q21F outlook as earnings are recovering and many countries have already reopened their borders. Moreover, U.S. and most European nations have widespread vaccinations. With those aforementioned factors, frozen seafood sales are expected to rebound and 2Q21F is a high season for this business.

 

Pressure from loss still affects Red Lobster in the U.S., but as the country planned to reopen international borders this summer and economic activities will resume from 2Q21 onwards. Thus analysts believe people dining at a restaurant will increase. This will help Red Lobster reduce losses. Overall, Red Lob is expected to end this year with another loss. 

 

Asia Plus Securities estimated TU to recover in 2Q as the low season had passed and Covid-19 situations in the Company’s major markets including Europe and USA are improving after coronavirus vaccine deploying. 

 

Shrimp and tuna will be a key driver for TU’s recovery in 2Q21. Shared loss from Red Lob is likely to decrease from this quarter onwards due to a successful dealing with pandemic as well as vaccine roll-out. Thai baht weakening also benefits earnings outlook in 2Q21.  

          

Country Group Securities expected YoY basic growth in 2Q21 as sales from frozen food are improving and many countries such as the U.S. and EU are about to open again. Furthermore tuna price is gradually rising.  Loss from Red Lob could decline as lockdowns in the U.S. eased.  

       

Maybank Kim Eng has recommended “BUY” on TU with a target price of ฿16.50/share, expecting sales of ambient seafood tend to decline from a high base but frozen seafood sales have recovered from city reopening. Red Lobster’s loss is expected to decline. 

 

The 2Q21 earnings should increase QoQ following seasonal impact, but may drop YoY from last year’s high base. Note that the high-margin ambient seafood saw strong sales during the lockdown. However, Red Lobster will recover significantly from heavy losses during the lockdown. Maybank maintained the 2021 earnings forecast, down on lower gross margins following the slowdown in ambient seafood sales.