Listed agricultural and food companies should post an increase of 86 per cent in combined net profit to Bt19.38 billion for last year, Capital Nomura Securities said yesterday.
Charoen Pokphand Foods (CPF), Thai Union Frozen (TUF) and GFPT are highlighted as the top picks for this year, several brokerages said.
"CPF will show [the highest] earnings growth of 232 per cent [in 2009], while Univanich Palm Oil will show the steepest profit fall, at 61 per cent," a Capital Nomura Securities analyst said.
The stocks are expected to continue to show a positive trend this year, due to higher demand as well as the economic recovery. The brokerage expects TUF's stock to hit Bt40.30, GFPT Bt43.50, Thai Vegetable Oil Bt18.65 and CPF Bt12.10.
"Investment should be focused on companies expanding capacity, as well as those with the potential to see higher product margins or effective cost reductions. The economic recovery will boost both demand and supply, and all companies must keep up with higher competition," the securities house said. TUF's 2009 net profit soared 52 per cent to Bt3.34 billion, matching the forecast of Siam City Research Institute (SCRI).
The increase was attributed to the sharp drop in the cost of tuna, by 28 per cent to US$1,141 (Bt37,818) per tonne, while the company's average price for canned tuna declined by only 6.7 per cent. This boosted the company's gross profit margin from 12.7 per cent to 15.1 per cent.
TUF expects to show continued improvement in net profit, SCRI said. Its value-added products like ready-to-eat meals should benefit greatly from the economic recovery. However, the tuna business will remain the major revenue contributor at 44 per cent. Tuna prices should rise 10 per cent to $1,250 per tonne this year.
However, the research house highlighted possible volatility in tuna supply, which could affect the price. Conservatively, TUF's gross profit margin is expected to fall slightly to 14.4 per cent, while net profit should grow only 4 per cent to Bt3.48 billion.
TUF's fair value could rise to Bt41.50, representing 10.5 times prospective earnings, which remains lower than the peak P/E ratio of 11-12 times. GFPT is expected to benefit from higher food exports, Phillip Securities said.
"A joint venture with Nishire should boost the company's performance. Moreover, GFPT is traded at a P/E ratio of five times, the lowest among Thai food exporters. Its share price could rise to Bt51," the securities house said.
GFPT's sales could expand this year, by 11 per cent to Bt12.6 billion, largely on higher capacity of feed meal, but net profit is expected to rise 6 per cent to Bt1.06 billion.
