Analyst Sees Limited Impact of COVID on GUNKUL, Giving “BUY” Recomm. with a TP at ฿3.60

KTB Securities (Thailand) (KTBST) has given a “BUY” recommendation on Gunkul Engineering Public Company Limited (GUNKUL) on limited impact from the coronavirus outbreak while being able to keep its power plant projects on track with a target price at ฿3.60/share.

 

KTBST expected a limited impact from the COVID-19 outbreak as the power business remains to be on track, but the EPC business may delay recognizing revenue for 1-2 months while its contribution is small at 20% of total revenue amid a moderate gross profit margin of 15% compared to 50% in the power business.

GUNKUL maintained its target to increase power generating capacity to 1,000 MW by YE2022E from 638 MW, currently. The company currently studies the projects with a combined capacity of 450-500 MW, which would see a concrete development in 2H20. KTBST thus maintained its 2020E core profit forecast at Bt2.7bn, which indicates a growth of +25% YoY.

 

GUNKUL’s share price outperformed the SET Index in 12 months given a limited impact from the deteriorating economy and the COVID-19 outbreak. KTBST believed the stock will likely remain outperforming the benchmark index as 1) KTBST estimated core profit to grow 16% CAGR in 2019-22E, which translates to PEG of 0.6x, on the back of a steady stream of revenue from the power business and substantial backlog of Bt9.0bn in the EPC business; and 2) the stock’s valuation looks attractive, trading at forward PER of 9.0x which is well below the sector’s average level of 20.0x.