SYNEX’s 2Q21 Earnings Hit a Record High of ฿211Mn, Analyst Recomm. “BUY” with TP of ฿36

Synnex (Thailand) Public Company Limited (SYNEX) posted record earnings of 211.12 million baht in the second quarter of this year, smashing market expectations. Revenue for the six months ending June 30, 2021 was 8,382.02 million baht, down from 8,693.47 million baht in the same period last year.

The improvement in operational performance was primarily due to an increase in gross margin across practically all product groups, most significantly computer and components. The supply of products in certain categories remains limited, while the demand for IT products is still high from both the COVID-19 pandemic and the rally in cryptocurrency.  This strong demand is anticipated to persist into the second half of the year.

Additionally, SYNEX continues to place a premium on cost control in both distribution and administration, leveraging technology to support in business management. As a result, it will improve efficiency and give opportunities for long-term sustainable business growth.

Meanwhile, net income from operations totaled 17,018.47 million baht in the first half of 2021, up 994.37 million baht or 6.21% year on year, owing to growing demand for IT products as a result of the government’s WFH and online learning policies, as well as the rally in cryptocurrency prices.

Furthermore, some business organizations adapted their working styles and facilitated meetings and other activities through electronic media. Net profit was 396.27 million baht in the first half of 2021, up 98.47 million baht or 33.07% from the previous year.

SYNEX has passed a resolution to offer an interim dividend payment at the rate of 0.18 baht per share to be paid on September 3, 2021, with an Ex-dividend date on August 24, 2021.

KTBST Securities (KTBST) holds a BUY rating on SYNEX and a target price of 36.00 baht, which is pegged to 2022E PER of 32x, or +3 SD above its 5-yr average. SYNEX reported a record high 2Q21 net profit of 211 million baht, up 27% YoY, 14% QoQ, which exceeded KTBST forecast by 6% due to higher than-expected FX gain. Excluding FX gain, core profit came in line with KTBST estimate. 

KTBST maintains 2021/2022 core profit forecast at 762 million baht (+37% YoY)/ 952 million baht (+25%). Total revenue is predicted to grow +16%/+19% on i) strong demand for new devices/equipment to support 5G technology and WFM, ii) new products and new partners, such as Realme, Nintendo Switch, Residential EV charger with DELTA, and vending machines with SABUY; and iii) contribution from an investment in Synnex Incubation, which should extend its distribution network. Gross profit margin is forecasted to increase to a high of 4.6%/4.7% in expectation of higher revenue from the high-profit-margin non-mobile segment.