Thai Union shares drop 5% on cost inflation fears; Analysts revise down 2022 earnings and TP

Thai Union Group Pcl. (SET: TU) shares fell as much as 5% in early Monday trading on worries over rising cost inflation and one-time loss from closure of a factory in Germany.


The share price of TU dropped THB0.90/share or 5.42% to THB15.070/share as of 10.52 hrs local time in Thailand, with a trading value of THB599 million.


Maybank Securities (Thailand) (MST) revised down TU’s 2022 earnings to reflect cost inflation. The 2Q22 bottom line was likely hurt by one-time items while core profit should have declined from a high base. Red Lobster faces challenges from lower demand and high staff costs. The target price of TU is cut to THB18.00 from THB19.60. Maintain HOLD given forecast dividend yield of 5.7%. 

MST estimates TU’s 2Q22 net profit to decline by 16% QoQ and 38% YoY to THB1.46 billion due to estimated one-time loss of THB250 million from closure of a factory in Germany as part of internal restructuring. TU’s affiliate, Red Lobster, likely booked a one-off THB600 million loss from fair value adjustment of its preferred shares. 

Regardless of these extra losses and FX gains, we estimate TU’s 2Q22 core profit was THB1.81 billion, up 6% QoQ but down 19% YoY. Due to strong demand, increased selling prices and THB depreciation, ambient seafood and pet care & value-added product sales tended to remain solid. However, frozen seafood sales should decrease from the high base last year after the reopening in the US