2024 Outlook for SCC Group Profits: Slow Recovery Expected and Impact on Dividends

The question is In 2024, are “SCC Group profits” still stable? Will the dividends be less, and how?

“After Today” reporters collected opinions from securities companies (brokers) to assess the overall operating results for 2024. The majority saw “a small recovery, but a recovery. The first half of the year has not been smooth. But expect it to be better in the second half of the year.”

Research Department, Asia Plus Securities Having stated that the year 2024 is believed “SCC” We are still facing many challenges during the first half of the year from many negative factors that are putting pressure on us, including geopolitical conflicts in many regions around the world causing uncertainty in the supply chain system and fluctuations in material prices raw

Including the risk of an economic slowdown in major countries which will affect the demand for petrochemical products when the new petrochemical complex project in Vietnam, or “Long Son Petrochemical Complex” (LSP), starts commercial operations all from the beginning of 2024 , causing SCC to recognize fixed costs (Fixed Cost) which include depreciation The interest burden and variable overheads come in at 800 million baht per month. The spread of HDPE-Naphtha and PP-Naphtha over the months should next stabilized at less than 400 USD/ton, which is lower than production costs. a typical olefins plant is 400-450 USD/ton.

However, the research department expects the situation to gradually improve in the second half of the year. On the hope that the world economy will gradually improve. Under the trend of reducing inflation and changing the direction of monetary policy to monetary easing policy Finance of many countries This leads to demand for petrochemical products. Gradually increasing back In addition, the new supply of olefin petrochemicals will decrease significantly during 2024-2026 compared to 2020-2023, resulting in a trend of petrochemical product spreads likely to increase in the second half of 2024 .

Although SCC’s long-term business picture still has a good direction. Under the concrete ESG plan, including accelerating the development of low carbon products Innovative products with high added value But the earnings forecast for the 4th quarter of 2023 has once again disappointed the market, along with the earnings direction in the first half of the year this is still facing significant risks related to the more difficult recovery of the petrochemical business. The latter must bear the additional costs of the LSP factory.

Researchers believe the turning point will occur as early as the middle of this year. Strategically, the investment weight has been reduced from Neutral to Underperform by evaluating the appropriate price using the Discounted Cash Flow (DCF) method, reduced from the original 340 baht to 330 baht, which n corresponds to a PER of 15.88 times and close to the book value. at the end of 2024. expected for 342 baht

282 important checkpoints

AIRA Securities (Thailand) Shows that the SCC price level has fallen following the latest sell signal when it broke the important support level at 282 baht and has fallen rapidly until there is a significant oversold condition in the RSI, making it ready. There will be a short rebound.

This year’s SCGP is improving slightly.

Trinity Warranties Maintain 2024 profit forecast at 5.8 billion baht, up 10% YoY, maintaining a conservative forecast. For profit recovery this year business in Vietnam and Thailand should grow well from tourism and domestic consumption, but in Indonesia it may gradually recover from better demand from China. But with higher freight rates due to Red Sea tensions, this could have an impact on costs in the period ahead.

The department believes that one factor that remains to overhang the share price is the acquisition of approximately 44% of the remaining shares from the existing shareholders. This will require about 23 billion baht, while the performance of the paper business in Indonesia is still not good. of economic factors and high inflation Currently, the management is talking to partners abroad and Indonesia who will become partners of the remaining Fajar, including the existing shareholders. Clarity is expected in mid-2024.

Therefore, we maintain our recommendation of Buy Trading and target price for 2024 at 36.50 baht based on PER Calculation of times 27. In the last 1 month, stock price has decreased more than 11% with the earnings trend still to slow down, but currently Trade PE on – 2SD showing downside starting to limit.

The trend is not bright – recovery is slow.

Analysis department of KGI Securities (Thailand) Looking at “SCGP’s” revenue target of 150 billion baht, an increase of 15% YoY, it looks challenging under the economic ups and downs. Currently, although the company has set a capital budget (CAPEX) of 15 billion baht (R&D 2 billion baht, ESG 5 billion baht, and M&A 10 billion baht), major deals may take time to complete .Meanwhile, SCGP is considering investing in a new packaging paper factory in North Vietnam. This will use an investment budget of 12 billion baht, with a final decision to be made in 2024.

Regarding the Fajar deal, which is one of the issues that investors are concerned about, Still in the process of finding partners. a deal On the positive side, the Department still sees that demand for packaging in Thailand and Indonesia still has a bright trend from the tourism and service sectors, while inflation and rising interest rates have been relieve.

Analysts revised estimates to reflect higher distribution costs in 2024 and weaker sales. and higher interest costs SCGP is struggling with adverse conditions, including the tight situation in China, the Fajar acquisition, and rising raw material costs. (recycled paper Meanwhile, old corrugated container (OCC) costs, a key cost, increased 12% QoQ to US$213/tonne.

Meanwhile, freight rates have increased as the situation in the Red Sea has become tighter, which is an issue that needs to be watched further, but the department estimates that profits from core businesses will be in 1Q24 increases QoQ due to higher numbers from abroad. tourists, the Chinese New Year, a presidential election in Indonesia (14 February 2024) and higher pulp prices.

However, the department still retains its advice. But reduced the target price to 34 baht from 39 baht, reflecting the decrease in profit and lowering EV / EBITDA to 8.5x (from 9x), slightly below the average of this group of stocks abroad. SCGP will pay DPS in the half. After 2023 at 0.30 baht per share (XD 2 April 2024), which corresponds to a profit of 1%.

Demand is recovering, 2024 is starting to look good

Research Department, Asia Plus Securities Shows that SCGP’s net profit for the 4th quarter of 2023 was 1,219 million baht, down 8% QoQ, below expectations. The results were pressured by businesses in the Philippines and Thailand which were slow in December . In addition, there is the burden of higher interest costs. The business that has clearly improved is the Fiber Chain business, but it does not contribute much to SCGP’s overall profit as it accounts for only 20% of its revenue The environment this year looks better than last year, especially on the demand side following the economic recovery in ASEAN Meanwhile, the current cost pressure is not much.

However, geopolitical risk factors are the main issue that must be closely monitored. Because it will create variations in the cost of energy and raw materials. Neutral investment weight, estimating the appropriate price at 45 baht, which corresponds to an Implied PER of times 30. In terms of technical signals, the trend of SCGP stock price is turning sideways, looking at support at 30 baht, resistance at 34.50 / 39.75 baht.

SCGD is recovering from a low base – SJWD supports electric vehicles

Finansia Cyrus Securities expects it “SCG Decor Public Company Limited or SCGD” Normal profit in 4Q23 was 150 million baht, down 34% qq, close to expectations, with sales falling due to weak overseas pressure. Especially Vietnam Domestically, GPM remained stable, ending 2023 with a net profit of 328 million baht (compared to a loss of 421 million baht in 2022) Excluding additional items, normal profit was 775 million baht, an increase of 6 % yes.

As for the forecast for 2024, the picture shows a recovery from a low base and GPM recovering from lower gas costs, However, the department is in the process of downgrading the forecast with a more conservative view. For starters, the 2024 normal profit can be reduced by 20% to 1.3 billion baht, an increase of 70% yy, and the target price will be lowered to 12 baht from the current 15 baht.

while stocks of “SCG JWD Logistics Public Company Limited or SJWD” Recommend buy, target price 21.50 baht, looking at the trend for 4Q23, it should be the highest from 2023 because there are no special costs of SCGL integration that happened in the 9 month period this year, almost 200 million baht, but if there goodwill, it will not be an item – cash is not a concern, the main business continues to improve. Some businesses are in a low season, but Automotive will make up for this, which has grown in line with the GLOBAL electric vehicle car sales.

The stock price of SCC closed trading today (24 January 2024) at 270 baht, an increase of 3 baht, which is equivalent to +1.12%, a trading value of 821.05 million baht. During the day, the price rose to a maximum of 271 baht and fell to a low of 265 baht.

The stock price of SCGP is 31.75 baht, an increase of 0.75 baht, equivalent to +2.42%, trading value 723.48 million baht, during the day the price rose to a high of 32.50 baht and fell to a low of 30.25 baht.

SCGD stock price was 9.50 baht, an increase of 0.45 baht, equivalent to +4.97%, trading value 45.55 million baht, during the day the price rose to a high of 9.60 baht and fell to a low of 8.95 baht.

The stock price of SJWD is 13.60 baht, an increase of 0.20 baht, equivalent to +1.49%, trading value 66.86 million baht. During the day, the price rose to a high of 13.70 baht and fell to a low of 13 baht.

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