Thailand’s KCE Stock Price Falls Further; Analysts See Outlook Remains Weak in 1Q23

Thailand’s KCE stock price fell further on Thursday following the announcement of poor earnings reports.

KCE Electronics Pcl. (SET:KCEshare )’s price had dropped by THB2.25 per share, or 4.46%, to THB48.25 per share, with a total trading value of THB2,224 million as of 12.09 p.m. (Thai time).

Profit for KCE dipped to THB2,317.2 m in 2022, or 12.6% of sales, from THB2,426.3 m, or 16.2% of sales in 2021, a decrease of 4.5%. The worldwide economic recession in 2022 had a significant impact on sales and product costs, which contributed significantly to the decline.

Meanwhile, KCE’s net profit in 4Q22 was THB500 million, down 29% YoY and 24% QoQ and below market expectations of THB650 million.

KCE’s stock has dropped more than 15% since the release of its 4Q22 and 2022 earnings reports.

KGI Securities said that the short-term outlook for KCE is likely to be weak and the recovery trend over the medium term is still uncertain. Thus, it maintained a rating of Underperform with an end-2023 target price of THB43.00 based on PER 22.0x.

The analyst expected KCE’s performance should remain weak in 1Q23 and earnings are expected to drop both YoY and QoQ. This would be mainly due to i) mute sales as there is only a visible backlog of 2-3 months (management estimates 1Q23 sales to be flat QoQ), and ii) softening profitability (from 1-2% price reduction as well as high cost in raw material from exchange rate volatility). The company has a high raw material cost covering around 2-3 months. As a result, the 1Q23 gross margin could fall even lower than 4Q22’s 21.2%.

Though the earnings momentum is expected to recover from 2Q23 onward, KGI foresaw limited potential earnings upside to our full-year forecast. Analysts at KGI maintained the 2023 earnings forecast and recommend investors stay on the sideline and watch for improvement in 1H23.