CH. Karnchang: A Comprehensive Analysis of Listed Companies

Date: December 6, 2024

Broker: Maybank Securities (Thailand) PCL

Introduction

In the fast-paced world of construction and infrastructure, CH. Karnchang has emerged as a pivotal player, thanks to its strategic investments and robust backlog. This detailed report delves into the financial and strategic prospects of CH. Karnchang and its associated companies, offering insights into their operational strategies, future projections, and investment potential.

CH. Karnchang (CK TB): Driving Growth with Strategic Backlog

CH. Karnchang, a leading construction company, stands out with its robust backlog and strategic investments in leading infrastructure operators like BEM, CKP, and TTW. With a current backlog reaching an all-time high of THB220 billion, CK is poised to enter a new S-curve phase. The company’s strategy revolves around securing additional projects from its subsidiaries, including the Double-Deck Expressway Project and the Southern Purple Line M&E Works, projected to elevate the backlog to THB280 billion and support annual construction revenue of THB40-50 billion over the next 5-6 years.

The company’s 4Q24 profit is expected to soften compared to its record-breaking 3Q24, yet strong growth is anticipated for FY24-26, driven by the high backlog and subsidiary profits. CK’s strategic position is further bolstered by its involvement in large-scale government projects, fueling speculative sentiment in the construction sector.

BEM (Bangkok Expressway and Metro PCL)

BEM, a key subsidiary of CK, contributes significantly to CK’s performance through investment profit sharing. With CK holding a 36.4% stake, BEM is expected to deliver steady earnings growth of 9-10% YoY, reaching THB3.8 billion, THB4.2 billion, and THB4.6 billion for FY24-26, respectively. This growth trajectory is supported by ongoing projects like the MRT Purple Line and Double-deck Expressway.

CKP (CK Power PCL)

CK holds a 30% stake in CKP, which is anticipated to experience substantial earnings growth, especially in FY25, with a forecasted 35% YoY increase. This growth is attributed to favorable La Niña conditions, enhancing water levels in key dams, thus boosting CKP’s power generation capabilities. CK is projected to recognize profit shares from CKP amounting to THB475 million, THB634 million, and THB670 million for FY24-26, respectively.

TTW (TTW PCL)

TTW, in which CK holds a 19.4% stake, contributes to CK’s financial health through consistent dividend income. TTW’s annual dividend payout is projected at THB464 million, distributed equally across quarters. This stable income stream reinforces CK’s financial stability and investment appeal.

STECON (Sino-Thai Engineering and Construction PCL)

Though holding a different investment strategy, STECON is noted for its conservative market positioning. Currently rated as a “HOLD,” STECON is valued at THB8.40 with a target price of THB9.50, indicating limited upside potential. Their strategic focus remains on maintaining operational efficiency and securing high-margin projects to sustain profitability.

ITD (Italian-Thai Development PCL) and UNIQ (Unique Engineering and Construction PCL)

Both ITD and UNIQ are not rated in this report, reflecting a neutral position on their current market activities. Their involvement in various infrastructure projects positions them as significant players in the construction sector, although specific financial forecasts and strategic insights are not detailed in this analysis.

Conclusion

CH. Karnchang’s strategic investments and extensive project backlog underscore its potential for sustained growth in the coming years. By leveraging its subsidiaries’ strengths and aligning with government infrastructure initiatives, CK is well-positioned to capitalize on emerging opportunities in the construction sector. Investors are encouraged to monitor CK’s developments closely, as its strategic initiatives could yield significant returns.