Analyst Recommends TMT for Its Sustainable Growth Momentum in 3Q21, Giving TP of ฿13

TMT Steel Public Company Limited (TMT) is predicted to sustain its growth pace in 3Q21, albeit decelerating from 2Q21’s record-high profit of 605 million baht due to rising steel prices. As a result, gross profit margin will still be about 12% on product limitations.

In 2Q21, TMT posted a new record profit of 605 million baht (+43%QoQ, +610%YoY) as steel prices rose to 30.61 baht/kg (+24%QoQ, +66%YoY). Revenue from sales was 5,215.97  million baht (+47.28%YoY). As a rise of the average selling price at 66.21% and the decreasing of sales quantity by 11.31% compared to the same period last year leading by  the global and local steel prices uptrend from the recovery of the global economy after the decline of the COVID-19 pandemic, which accelerated the demand of steel consumption globally in constructions and various industries meanwhile, the supply in every level of steel supply chain could not deliver as demand which drive a quick rise of steel price globally. While in 2Q21, a long holiday for Songkran and the quick rise in price diminished the demand to stock made the lower sales quantity this year.

For the 3Q21 outlook, Maybank Kim Eng (Thailand) (MBKET) forecast that TMT will still benefit from its selling price that continues to rise, although not as strong as 2Q21. Selling price in July was 32.9 baht/kg and 33.8 baht/kg in August, resulting in gross profit margins that will still be about 12%. Due to product limitations, other steel producers face the Covid-19 epidemic, while TMT has a factory in Wang Noi, which is well controlled and has completed 2 injections of vaccinations for all 1,400 employees. So, the 3Q21 profit is estimated to still stand out at about 250-300 million baht.

Downstream steel spread, which is a product of TMT,  will continue to be good in 4Q21, driven by TMT’s comprehensive products, selling products plus solutions and services while competitors are not ready. 

MBKET revised up its forecast, expecting 2021 profit to hit a new record high of 1.448 billion baht, (+169% YoY). The current share price is trading at a low P/E with good dividend yield. TMT has achieved “ESG100 Company” sustainability status for the sixth consecutive year. So, MBKET maintains a “TRADING BUY” with a target price of 13 baht.