Analyst Recomm. “BUY” on XO as Demand for Chili Sauce Continues to Rise
KTBST has given a “BUY” recommendation on XO with a target price of 26 baht per share, citing a continued rising demand in chili dipping sauce until 2022.
As Exotic Food Public Company Limited (XO) is an agro-industrial products exporter specializing in chili dipping sauce under its own brands, KTBST Securities (KTBST) forecasts the company to gain sales revenue of up to 400 million baht in 2Q21, accounting for 89% of the backlog of 450 million baht, which is the company’s highest quarterly revenue ever. Additionally, XO has an 80% usage rate, up 70% from 1Q21. Currently, approximately 50% of the transaction fee has been deducted from the budget of 10-15 million baht.
KTBST has given a “BUY” recommendation on XO with a target price of 26 baht per share, citing a continued rising demand in chili dipping sauce until 2022.
Due to the reason that XO has already set the cost of its sauce production until 2022, the company’s gross profit margin is likely to remain high, and the 2020-22 EPS CAGR is anticipated to stay at 31.4%, higher than the prior average of 24%.
For 2Q21, KTBST projects XO’s earnings to be 132 million baht (+44% YoY, +26% QoQ) and total revenue to be 420 million baht (+24% YoY, +19% QoQ). While GPM would be comparable to 1Q21 at 45% (vs. 1Q21 at 45.5% and 2Q20 at 41.8%), due to the stabilization of the cost. XO believes it can solve the container and maritime carrier shortages.
Meanwhile, 2021 net profit is estimated to be 484 million baht (+52% YoY), assuming 30% YoY growth in sauce revenue and a 45% GPM in support of cost price freeze throughout 2022.
KTBST expects XO to maintain the positive sales growth momentum in 3Q21. XO currently has a 300-350 million baht order until August 2021. Additionally, orders for hemp products totaling 3 million baht will be made before the end of 3Q21. In comparison to other new products, XO anticipates a strong demand for hemp products.
Additionally, XO intends to enhance its production capacity with a budget of 100 million baht. The new manufacturing capacity is expected to begin operations in 2Q22. KTBST anticipates boosting annual sales by 600-700 million baht.