Analyst Expects to See Growth from ‘Thai Union’ in 2H23 as Tuna Costs Decline

The share price of Thai Union Public Company Limited (SET: TU) has been underperforming so far this year as high tuna price pressures the company’s margin, while also suffering loss from its Red Lobster business.

Thai Union, Thailand’s leading producer of seafood-based food products, mainly canned tuna, saw its share price dropping by 14% from the beginning of this year and 24% from its 52-week high in October 2022 at THB 19.1 per share. TU closed at THB 14.60 on Friday.

Price of monthly frozen (whole) skipjack tuna raw material in August was at $1,800 per ton, coming down from the $2,000 level in the second quarter of this year.


FSS International Investment Advisory (FSSIA) expected a 3Q23 net profit of THB1.3b (+26.8% q-q, -48.5% y-y), while core profit is expected to slightly increase by 2% q-q. The main reason is that Red Lobster’s contribution should turn to a huge loss of around THB250 million, down from a loss of THB94 million in 2Q23. However, FSSIA maintained its positive view that TU’s earnings have passed the bottom in 1Q23, in line with its subsidiary ITC.

FSSIA expected to see some pet food business improvement, thanks to US customers restocking again. Meanwhile, its ambient revenue should slightly grow by 1.6% q-q and 2.6% q-q due to an EU customer recovery. In addition, the advisory projected TU’s 3Q23 gross margin to increase by 20bps q-q to 17.1%, up from 16.9% in 2Q23. However, its gross margin would still drop from 18.2% in 3Q23, due to a change in product mix and higher tuna prices.

Assuming in-line results, TU’s 9M23 net profit would equal THB3.35 billion (-43% y-y), accounting for 81% of FSSIA’s full-year forecast. It is expected that TU’s 4Q23 net profit will continue to grow q-q and y-y, breaking with seasonality. In particular, its customers’ restocking of ambient and pet food products should continue in 2H23. Aside from that, FSSIA expected that its 4Q23 gross margin will improve q-q, thanks to declining tuna prices. Preliminarily, FSSIA saw a 10-15% upside to conservative 2023 net profit forecast.

FSSIA reiterated its BUY recommendation with its 2024 TP of THB18, based on an SoTP valuation. The current share price is trading at only 13.1x 2024E P/E and has an upside of 26%.