Date: October 21, 2024

Broker: UOB Kay Hian

Company Overview

Thai Union Group (TU) manufactures and exports frozen and canned seafood, including canned food, frozen food, and snacks. The company is also involved in pet food, value-added products, and animal feed.

Stock Data

• Share Price: Bt14.80
• Target Price: Bt18.00
• Upside: +21.6%
• Market Capitalization:
  • Bt65,935.5 million
  • US$1,968.2 million
• Shares Issued: 4,455.1 million
• 3-month Average Daily Turnover: US$7.9 million
• 52-week High/Low: Bt16.00/Bt13.00

Recent Developments

• New Culinary Plant: TU officially started operations at its new culinary plant in July 2024, combining three old plants with an additional capacity of 38%.
• Product Range: The plant manufactures ready-to-eat meals, dim sum, and baked goods, with both Halal and non-Halal production lines.
• Current Utilization Rate: Approximately 60%, based on two shifts per day, with additional space available for future capacity increases.

Financial Performance and Targets

• Sales Contribution: Management expects total sales from the new plant to reach Bt1.8 billion in 2024 and Bt2.2 billion in 2025, aiming for Bt3.1 billion by 2030, representing a 7.1% CAGR from 2026-2030.
• Short-Term Impact: While the new plant enhances competitive standards and production capacity, there may be a short-term impact on profitability due to additional depreciation.

Financial Metrics

Key Financials for FY Ended December

• Net Turnover:

  • 2022: Bt155,586 million
  • 2023: Bt136,153 million
  • 2024F: Bt144,017 million
  • 2025F: Bt150,624 million
  • 2026F: Bt156,588 million

• Net Profit (Adjusted):

  • 2022: Bt6,981 million
  • 2023: Bt4,801 million
  • 2024F: Bt5,428 million
  • 2025F: Bt6,301 million
  • 2026F: Bt6,797 million

Market Position and Strategy

• Focus on High-Margin Products: TU is committed to improving margins and competitive advantage through the introduction of high-margin, value-added products.
• Sales Regions: Sales contributions come from three main regions: the US and Canada (36%), Thailand (34%), and the EU (29%).

Earnings Outlook

• 4Q24 Projections: Slight QoQ improvement in earnings is expected due to top-line and gross profit margin enhancements, although seasonality may affect the overall performance.
• Caution on Red Lobster: There are potential legal challenges related to TU’s association with Red Lobster, which may impact financial performance.

Investment Recommendation

• Rating: Maintain BUY
• Target Price: Bt18.00, pegged to TU’s five-year mean PE target of 14.4x.

This comprehensive overview consolidates all relevant details about Thai Union Group (TU) from the provided PDF.