CH Karnchang: Optimistic Outlook for 2025

UOB Kay Hian

Thursday, 21 November 2024

CH Karnchang Public Company Limited (CK) is making waves in the construction industry with its optimistic outlook for 2025. With a track record as the second largest contractor in Thailand, CK boasts extensive experience in building mass transit systems, water treatment facilities, and hydro-electric dams. This article delves into the detailed analysis and forecasts presented by UOB Kay Hian, providing a comprehensive view of CK’s future prospects.

Company Profile and Market Performance

CK, an industry heavyweight, is trading at an undemanding valuation with a target price set at Bt27.30, presenting a 52.5% upside from its current share price of Bt17.90. The company holds equity stakes in several infrastructure companies, strategically diversifying its long-term revenue streams. CK’s strong presence in the industrial sector is reflected in its fiscal year 2024 projections with a NAV/Share of Bt15.83 and Net Debt/Share of Bt28.66.

Financial Overview and Stock Data

CK’s market capitalization stands at 30,320.8 million Baht (approximately 875.1 million USD), with an average daily turnover of 2.4 million USD. In terms of stock performance, CK has experienced a downward trend over the past year, with a significant decrease of 17.1%. However, the company remains resilient, backed by its strong major shareholders, including Mahasiri Siam and CH. Karnchang Holding.

Construction Performance and Future Projects

The fourth quarter of 2024 is anticipated to see an improvement in construction performance, albeit with tempered earnings due to lower equity income. The year 2025 is poised to bring growth through ongoing projects, including the highly anticipated Orange Line (West) and the Double Deck project. These projects are expected to contribute to CK’s robust backlog, supported by healthy gross margins and equity income growth.

Stock Impact and Financial Forecasts

Despite the expected improvement in operations, the company’s bottom line is projected to decline quarter-on-quarter due to seasonal factors and lower equity income. However, the promising outlook for 2025 remains intact, driven by key projects like the Orange Line, valued at Bt109.2 billion, and the Double Deck project, valued at Bt35 billion.

Key Financial Metrics and Earnings Recap

CK reported a net profit of Bt1,008 million for the third quarter of 2024, exceeding expectations and accounting for 89% of the full-year forecast. The company’s construction revenue totaled Bt9.4 billion, underpinned by progress in significant projects such as the Luang Prabang Hydroelectric Power Project and MRT Purple Line (South). CK’s equity income and share of profits from investments saw a substantial increase, driven by improved performances in associated ventures.

Potential Risks and Valuation

While CK faces risks related to delayed construction, higher material costs, and potential wage hikes, the company’s valuation remains attractive. With a target price of Bt27.30 based on 1.6x 2025F P/B, CK is positioned for growth, supported by its robust backlog and strategic project pipeline.

Environmental, Social, and Governance (ESG) Commitments

CK is committed to sustainable practices, prioritizing environmentally friendly materials and community engagement. The company has a strong governance framework, focusing on clear leadership roles and responsible ESG practices, aligning with its reputation for social stewardship and risk management excellence.

Conclusion

CH Karnchang is a company to watch, with its strategic projects and robust financial outlook setting the stage for an exciting 2025. Investors are encouraged to maintain a BUY position, given the promising growth prospects and the company’s strategic positioning in Thailand’s infrastructure sector.