KTBST Raises TVO’s TP to Bt44 on Growing 4Q20 Earnings over Higher Soybean Prices

KTB Securities (Thailand) (KTBST) has given a “BUY” recommendation on Thai Vegetable Oil Public Company Limited (TVO) with an upgraded target price from ฿35.25/share to ฿44.00/share on the expectation of growing 4Q20 earnings from higher soybean prices.

 

KTBST reiterated a BUY rating on TVO but raised its target price to Bt44.00 from Bt37.00 and 2021E PER multiples to 17.8x (+1 SD above its 5-yr average) from 14.0x (5-yr mean). 4Q20E net profit was forecasted to grow +17% YoY, +31% QoQ to Bt464mn after soybean meal price rose +17% YoY, +22% QoQ to USD1,137.2 cent/bushel and soybean meal price up +30% YoY, +29% QoQ to USD386.8/short ton in the period.

The security company slightly cut its 2020E/2021E net profit forecast by 5% each to Bt1.65bn (+17%)/Bt2.02bn (+22%). Such strong growth in 2021E would be driven by 1) rising soybean/soybean meal prices, which KTBST forecasted to increase +46%/43% from the average levels in 2020 due to a tighter supply from La Nina effect in South America, 2) a stronger demand from China given an easing of the US-China trade dispute, and 3) and increase in edible soybean oil price.

 

In addition, TVOs share price outperformed the SET Index by 13% in the one-month timeframe following a higher soybean price. KTBST forecasted the soybean price to remain at a high level, which should bode well for TVOs 2020-21E earnings growth (+17-22%). TVO thus should trade at +1 SD above its 5-yr average, which is a similar level seen in 2016-2017, a period the company benefited from the La Nina effect.