Comprehensive Analysis of Thai Foods Group PCL
Broker: UOB Kay Hian
Date of Report: Friday, 13 December 2024
Introduction
In the latest report by UOB Kay Hian, Thai Foods Group PCL (TFG TB) has been thoroughly analyzed, revealing significant insights into its operations, market dynamics, and future potential. This comprehensive analysis provides an in-depth look into TFG’s business expansion strategies, financial performance, and the underlying factors driving its growth trajectory.
Company Description
Thai Foods Group PCL is a prominent player in the consumer staples sector, known for its integrated operations in producing and distributing frozen and chilled chicken products, as well as animal feed, catering to both domestic and international markets. The company’s strategic expansions and innovative approaches position it as a formidable entity within the industry.
Stock Performance and Market Position
As of the report date, TFG’s share price stands at Bt3.52, with a target price set at Bt6.00, indicating a potential upside of 70.45%. The stock is listed under the Bloomberg ticker TFG TB, with a market capitalization of Btm 20,454.0 and a 3-month average daily turnover of US\$m 0.7. The company’s major shareholders include New Star Victor CO LTD, BNP Paribas (HK Branch), and Winai Teawsomboonkij.
Business Expansion Strategy
TFG has embarked on an ambitious business expansion through both horizontal and vertical integration. Notably, the company is enhancing its retail business, Thai Foods Fresh Market, with plans to increase its store count to 420 by the end of 2024 and 650 by the end of 2025. This expansion aims to improve market penetration and internal efficiencies, offering a competitive edge over local shops and modern trade stores.
Financial Performance and Key Metrics
The report highlights TFG’s financial projections and key metrics for the upcoming years. For 2024, net turnover is expected to reach Btm 64,724, with an EBITDA of Btm 7,303. The company’s net profit for the same year is projected at Btm 3,441, supported by a robust EBITDA margin of 11.3% and a net margin of 5.3%. These figures underscore TFG’s resilient profitability and growth potential.
Market Advantages and Opportunities
TFG’s strategic location, store format, and competitive pricing provide it with significant advantages over both big grocery shops and local markets. The company plans to leverage these strengths by rolling out stores near local markets, utilizing modern trade formats to offer better hygiene, competitive pricing, and a wider variety of products. With over 1,580 markets and numerous districts and sub-districts in Thailand, TFG has ample opportunities for expansion.
Positive Outlook and Future Plans
The report maintains a positive outlook for TFG’s commodities business, particularly in its swine and chicken sectors. The company plans to open an integrated chicken business in Vietnam by 2026 and expand its swine capacity to meet consumption growth in the region. As the fourth largest swine farm company in Vietnam, TFG is well-positioned to capitalize on these opportunities.
Valuation and Recommendation
UOB Kay Hian recommends maintaining a BUY rating for TFG, with a target price of Bt6.00. The valuation is based on a PE method pegged to 10x 2025F PE, reflecting TFG’s potential as a top pick in the market, benefiting from ASF in Vietnam, reduced raw material costs, and growth from its retail business.
Environmental, Social, and Governance (ESG) Initiatives
TFG is committed to achieving net-zero emissions by 2065, emphasizing efficient resource use and environmentally friendly operations. The company also focuses on social responsibility and governance, receiving an “Excellent” rating from the Thai Institute of Directors for its corporate governance practices.
