Company Overview

CH. Karnchang Public Co Ltd (CK), Thailand’s second-largest contractor, stands out for its extensive experience in constructing mass transit systems, water treatment facilities, and hydroelectric dams. The company has strategically diversified its long-term revenue streams by acquiring equity stakes in several infrastructure-related companies.

Stock Performance and Key Metrics

The stock is currently priced at Bt15.20, with a target price of Bt20.20, implying an upside potential of +32.9%. CK’s market capitalization stands at Bt25,634.6 million (approximately US\$760.8 million), with a 3-month average daily turnover of US\$1.7 million. The stock’s 52-week high and low are Bt24.60 and Bt14.90, respectively.

Major shareholders include Mahasiri Siam (14.3%), CH.KARNCHANG HOLDING (10.2%), and Thai NVDR Company Limited (6.6%). As per FY24 estimates, the NAV/Share is Bt16.22, and Net Debt/Share is Bt27.64.

4Q24 Results Preview

Anticipated Results

CK’s 4Q24 results are expected to disappoint, driven by reduced equity income, higher SG&A (Selling, General, and Administrative) expenses, increased interest costs, and the absence of dividend income. The projected net loss for 4Q24 is Bt35 million, reflecting a significant decline both year-over-year (yoy) and quarter-over-quarter (qoq).

Construction revenue for 4Q24 is estimated at Bt9.4 billion, a 6% yoy increase but flat qoq. The growth is attributed to progress in key projects such as the Luang Prabang Hydroelectric Power project, the MRT Purple Line, and the Double Track (Denchai-Chiang Rai-Chiang Khon) project. However, gross margins are expected to remain at 7.0%, consistent with project completion stages, particularly in hospitals.

Equity income is forecasted to decline due to weaker performance from CK Power (CKP), impacted by seasonality and the depreciation of the Thai baht, which affects loans for the Luang Prabang Hydroelectric Power project.

Key Financials and Forecasts

Stock Impact and Revenue Outlook

The company’s backlog remains robust, exceeding Bt200 billion as of 4Q24. This solid backlog is expected to drive construction revenue growth in 2025, particularly from key projects like the MRT Purple Line and MRT Orange Line.

Earnings Revision

Forecasts for 2024-25 have been revised downward by 12-19% due to a more cautious outlook on revenue and profitability. Key risks include construction delays, rising material costs, potential wage hikes, political uncertainties, and delayed project biddings.

Valuation and Recommendation

The recommendation for CK is to maintain a “BUY” rating, albeit with a reduced target price of Bt20.20, down from the previous Bt27.30. This valuation is based on a 1.2x 2025F P/B ratio, reflecting a de-rating from 1.6x. While concerns over rising expenses and currency-related volatility persist, CK’s undemanding valuation and potential order wins from upcoming project biddings present a compelling investment case.

ESG Commitments

CK demonstrates a strong commitment to Environmental, Social, and Governance (ESG) principles:

• Environmental: CK prioritizes environmentally friendly materials and improved environmental management systems.
• Social: The company focuses on community engagement and corporate social responsibility (CSR) initiatives.
• Governance: CK has revamped its risk management practices to align with sustainable value creation.

Conclusion

CH. Karnchang Public Co Ltd remains a solid investment opportunity despite near-term headwinds. With a proven track record, extensive project backlog, and a focus on operational excellence, CK is well-positioned for future growth. Investors should consider the company’s potential for securing new projects and maintaining high-margin work as key catalysts for its stock price.