CK Gets Ready for New Round of S Curve Growth, Analyst Recomm. “BUY” with TP of ฿21

The analyst believes CH. Karnchang Public Company Limited (CK)’s performance is on the verge of uptrend, and the company is approaching a new round of S Curve growth, thanks to the addition of an overwhelming amount of backlog.

Due to the large government projects that have not yet begun construction, CK anticipates receiving approximately 300 billion baht in new jobs (excluding the orange line, which will cost 170 billion baht), and estimates a backlog volume of one hundred million baht at the end of this year, up from the current 3.1 billion baht.

Construction income is predicted to remain low in 2Q21, but will rebound in the second half of the year and accelerate in 2022, attributable to the addition of a backlog. The company remains on track to achieve its revenue objective of approximately 16 billion baht in 2021.

Concerning the COVID-19 epidemic in the construction worker camp, it will have no impact on development progress because the company conducts continuous Covid-19 screening and the majority of workers is Thai.

Furthermore, CK considers that the increasing steel price has had a negligible effect because the company practices quality management.

Although operating results for the first quarter ending March 31, 2021 declined to 3,543.79 million baht when compared to the prior year, the company ended the quarter with a net profit of 207.68 million baht, making a turnaround from a net loss in the same period of last year. This was mostly due to interest income of 382.91 million baht related to construction period extension for Bang Phli-Suk Sawat (Bang Phli-Bang Khuntian) Expressway according to the Supreme Administrative Court’s decision.

KTBST Securities (KTBST) maintained a BUY rating on CK and a target price of 21.00 baht.  2021 core profit is forecasted at 882 million baht (+125% YoY), mainly driven by both BEM and CKP, which are expected to increase significantly. The sewerage tunnel project of Metropolitan Waterworks Authority is expected to begin work immediately. Meanwhile, the Den Chai double-track railway project contract will be signed in 3Q21 and construction will begin in 4Q21.

Initially, the double-track railway project will add at least 5% upside to 2022 earnings. And 2Q21 results have a potential profit turnaround. Supported by the operating outcomes of associated companies.